Buying a new car on finance

jesteh

I wonder if anyone can help me unravel this.
I am looking to buy a new car which is on offer. Its a showroom car that is being superseded by a new model so they are looking to move it to make space for new one. So the dealership have a good offer on it at present.

When I looked to buy it, I was offered a cash price and a PCP price. PCP price comes with a deposit contribution of 5,500 which is standard on this model but the dealership then increased the price by 4,800 to account for that contribution. So instead of 5,500, in effect, deposit contribution on PCP has been reduced to 700.

Is this correct way of doing it? I am kind of disappointed as it means that I don't gain from the fantastic deposit contribution and effectively means that on PCP the car is no longer a great deal, just an OK one.

daveyjp

There is no cash price or PCP price.

The top line price can't be different to reflect how you are paying.

Negotiate the price, don't talk about how you are paying.

Once agreed talk finance. If there is a discount or contribution for PCP this is taken off the agreed price, but keep in mind PCP is full of traps for the unwary, so a discount can soon disappear once deposit, APR and balloon are taken into account.

If its not a deal you want walk away.

jesteh

Sorry, thats not what I am getting. I am getting a cash price which is 35,000. I am then getting PCP price which 40,000 but has deposit contribution from finance company of 5,500, so you end up with 34,500 PCP price. I am trying to understand if this is normal or not? Ultimately, if I go for PCP, I want to make sure I am taking advantage of any finance deals and not putting extra 5 grand in salesman pocket.

daveyjp

In that case walk.

jesteh

Can you please elaborate? I am trying to understand if this is a common practice in car industry or not? Car appears to be a good price but as its not something I buy a lot, I am trying to understand the system.

jesteh

Sorry, I don't think I have made it clear what is going on.
What I am getting is:
Dealer cash price: £35,500 (if I pay in cash)
Dealer finance price: £40,300 (if I go on PCP, this however comes with manufacturer deposit contribution of £5,500). So in reality, if I chose to immediately settle, I would be paying £34,800 - a bit cheaper than cash price but not much.
My question is - is it normal practice to inflate the PCP price above cash price where there is a large manufacturer deposit involved? Or if I go on PCP is dealer getting extra £4800 that I am not.

AdrianC

Ah... That makes more sense now.

So the list price is £40,300.
If you pay cash, you get a discount to £35,500.
If you buy on PCP, you get a £700 bigger discount, to £34,800.

BTW, you do realise that the £300 by which the list price is above £40k will cost £320 per year extra in VED over the next five years? (At least, it's £320/yr now - it may go up in future years)

Snuggles

Hang on, unless I've misunderstood, this isn't normal at all in my experience. Where manufacturers are offering a PCP deposit contribution, the cost to the purchaser is usually the cash price, less the deposit contribution. So if a car is £20k with a £3k manufacturer deposit contribution, the (PCP) cost to the purchaser is £17k (plus interest of course). The cash price is £20k.

The OP is saying that the dealership are effectively adding back the deposit contribution to the cash price before calculating the PCP, so that the PCP cost to the purchaser is £23k less the £3k deposit contribution - the same as the cash price. So they are getting no benefit from the manufacturers deposit contribution. I've never come across that before.

Unless the OP means that the TOTAL PCP price (including interest) is the same as the cash price. In which case it would be correct.

Ah, the OP has now confirmed this - as I said I don't think it's normal at all.

daveyjp

Snuggles wrote: »

Hang on, unless I've misunderstood, this isn't normal at all in my experience. Where manufacturers are offering a PCP deposit contribution, the cost to the purchaser is usually the cash price, less the deposit contribution. So if a car is £20k with a £3k manufacturer deposit contribution, the (PCP) cost to the purchaser is £17k (plus interest of course). The cash price is £20k.

The OP is saying that the dealership are effectively adding back the deposit contribution to the cash price before calculating the PCP, so that the PCP cost to the purchaser is £23k less the £3k deposit contribution - the same as the cash price. So they are getting no benefit from the manufacturers deposit contribution. I've never come across that before.

Unless the OP means that the TOTAL PCP price (including interest) is the same as the cash price. In which case it would be correct.

Ah, the OP has now confirmed this - as I said I don't think it's normal at all.

Correct. They are dual pricing depending on how the buyer is paying.

Pay cash and the price is £35.5k. Pay using PCP and the price increases to £40.3k.

FCA may be interested.

Tell the dealer you would like both these quotes in writing before making the final decision and see how they present the figures.

mark5

Its just basically playing with words/figures but your still getting the car for a bigger discount on pcp at 700 cheaper than the cash price, ignore the rest of the jargon.

The finance deal probably requires a decent deposit hence the large gifted deposit instead of a straight reduced purchase price on pcp.

Forget the joking deposit of 5500 this is irrelevant, the important thing here is the car would cost you 34,800 on pcp, is this a good deal for you, yes or no?

34800 after 700 gifted deposit is the same as 34800 after a 5500 gifted deposit, does it matter how its worded?

jesteh

Yes, exactly why I am confused.

I got figures in writing, cash price is exactly that - cash price (35.5k). Finance deal is higher cash price of 40+k minus allowance/advance of 5.5k which then drops it to 34.8k. So in practce I am not losing out by going either finance or cash route - I am just not gaining the benefit of deposit contribution. My understanding was that deposit contribution is an incentive to take finance on a car. Is this then a case of
- deposit contribution really exists, its incentive provided by finance company to me and in my case is pocketed by the dealer .
- deposit contributon is not a real contribution, its just a discount on the car to encourage sales and can be flexed by the dealer to keep car at fair price.