Hire Purchase Agreements

stridernje

I would like to open a discussion on Hire Purchase Agreements when buying a new car.

So we open with the list price of the Car = A.
We can then negotiate any dealer / manufacturer discounts = B
We can then include a deposit paid by us = C.
Finally depending upon millage, colour, trim and term of contract the dealer will arrive at a residual value of the car. = D
Therefore A - B - C - D = E.
E being the balance to be paid over the term adjusted by the APR.

My reason for asking is that I have seen a car I want to buy. I want to pay £250.00 per month. To achieve this the dealer said we need to find 4K to take off the list price value. So I will pay some (2.5K) and they will pay the rest (1.5K). Great, we get to £250.00 per month. However I checked on CARWOW and can buy the exact same model for 4K less of the list price. So I rang them and they said with zero deposit the repayments would be £300.00 per month. How does that stack up?

TheMoonandBack

Hi, I think the advice you will get on here is don’t do it....

daveyjp

Its stacks up in that the salesman is doing his job, i.e. get as much out of the punter as possible.

As an alternative consider borrowing the money from a third party and buy direct from a broker.

IanMSpencer

It stacks up because borrowing from a dealer is likely to be the most expensive. They are under no obligation to give you a good deal. You've got an open hand, as you've said what you can afford, you have shown you don't really understand how the loan market works, and he's got a buyer who isn't yet walking away when you can get the same car £4k cheaper elsewhere. If the online price is £4k cheaper, then see what finance options the online offer is giving, or check with your bank, it's a no brainer if the dealer won't match it. Car salesmen just want to get the most money out of you that they can, they are not your friend and they are not doing you favours, however pleasant they may seem.

For example, we looked at a new car, used an online dealer, got the PCP deal which was with Barclays and went back to the dealer who matched the monthly payments because they could use a much higher trade in value, but the rate was actually a lot worse. We then got the car for cash at the discounted value that they were working from - about 15% - not the greatest deal that people around here get but not bad for my pathetic negotiating skills.

stridernje

But why 2 figures for the car which is the same sale value.

Dealer A has said that to get to £250.00 per month payments equals 2.5K deposit from me and they will put 1.5K down. Total 4K. Therefore a 26K list price car becomes 22K.
Dealer B will sell me the car for 22K (4k of list price) but wants 300.00 per month. To do this they are either changing the residual value of the car or increasing the amount of credit charge or changing the APR. I thought BMW finance sets the residual amount, finance charges & APR, all of which will determine the final monthly payments.

AdrianC

stridernje wrote: »

I would like to open a discussion on Hire Purchase Agreements when buying a new car.

So we open with the list price of the Car = A.
We can then negotiate any dealer / manufacturer discounts = B
We can then include a deposit paid by us = C.
Finally depending upon millage, colour, trim and term of contract the dealer will arrive at a residual value of the car. = D
Therefore A - B - C - D = E.
E being the balance to be paid over the term adjusted by the APR.

My reason for asking is that I have seen a car I want to buy. I want to pay £250.00 per month. To achieve this the dealer said we need to find 4K to take off the list price value. So I will pay some (2.5K) and they will pay the rest (1.5K). Great, we get to £250.00 per month. However I checked on CARWOW and can buy the exact same model for 4K less of the list price. So I rang them and they said with zero deposit the repayments would be £300.00 per month. How does that stack up?

If there's a residual, then it's not "HP", it's a PCP.

Carwow are probably going with a different residual (balloon). Don't forget that you're financing the residual - D - so the equation is closer to being

A-B-C = E+D

because you're paying interest on both E and D. The left hand side (A-B-C) is what you'd be paying in cash, the right hand side is what you're financing (E+D).

bazzyb

stridernje wrote: »

I thought BMW finance sets the residual amount, finance charges & APR, all of which will determine the final monthly payments.

You thought wrong. The dealer will have control of the rate and will adjust according to how much commission they wish to make from the deal. Are you even sure they are both using the same finance provider? You mentioned BMW - the BMW dealer will be using Alphera for their quote which will give a much more generous residual/balloon payment than if Carwow are quoting from a different lender who have more reserved residuals. Even if using the same lender, different dealers could have different rate cards.

All the above is assuming you are in fact talking about PCP, but as you mention HP if this is actually HP + balloon (unlikely) then the dealer would also be able to change the amount of the balloon payment to build the deal.

neilmcl

AdrianC wrote: »

If there's a residual, then it's not "HP", it's a PCP

If you want to be technically correct a PCP is an HP agreement but I get the point you're making

Lucky_Duck_2

bazzyb wrote: »

You thought wrong. The dealer will have control of the rate and will adjust according to how much commission they wish to make from the deal. Are you even sure they are both using the same finance provider? You mentioned BMW - the BMW dealer will be using Alphera for their quote which will give a much more generous residual/balloon payment than if Carwow are quoting from a different lender who have more reserved residuals. Even if using the same lender, different dealers could have different rate cards.

All the above is assuming you are in fact talking about PCP, but as you mention HP if this is actually HP + balloon (unlikely) then the dealer would also be able to change the amount of the balloon payment to build the deal.

I recently bought a car via Carwow, the finance offered was exactly the same as that advertised on the manufacturer's website

System

Well with the payments and deposits being mentioned this clearly is another PCP deal. What is it with people rushing like lemmings off a cliff to blow £14k or more over 4 years to walk away with nothing?

stridernje

er... because we can??