New car- cash or finance?

mustardtree6

I'm fortunate to be able to buy a new car with cash. However I have noticed that some dealers are offering a dealer discount if you take out finance and overall works out cheaper. Is it possible or a good idea to deliberately take out the finance and then pay it off within the 14 days cancellation period? Had anyone done this? How easy is it to cancel and pay it off? Thanks

Grumpy_chap

Lots of people do what you propose.  
1. Negotiate best price
2. Take finance incentive
3.  Pay off finance to avoid interest

DrEskimo

It's very easy to do as well. You will likely get an online portal for the finance if from a main dealer, so you can view the balance and request a settlement as soon as you like.

Of course the MSE question is, why brand new? Could you get a used version of the same car to save on lower depreciation costs? Costs of extra maintenance and extended warranties (should you even want to) will be insignificant to the savings in depreciation.

mustardtree6

I have done a bit more research. So the RRP is £15k. On finance it is £12k. So quite a significant saving. If I paid the maximum deposit of £3k (25%) then the remaining £9k is on finance. Once the first month payment is taken I would pay the rest of it apart from the final £100. Then I will request a settlement figure which I think will include 2 months worth of interest on £100.  It's with a major dealership. 1 year old second hands are priced at £12k. So would rather get a brand new one.  Is there a flaw in my plan.? TIA

noclaf

If you don't mind sharing, what model/make is the car?
Also why would you leave a £100 balance...maybe I am missing something but could you not just settle the whole balance in one hit?

peter_the_piper

Consider negotiating for one off payment for servicing for the next 4 or 5 years, not sure if that applies to second hand though.

mustardseed6

It's a Skoda Fabia 4.3% APR with £2500 paid towards the deposit is available.   So once I have negotiated a cash price, if I take the finance, I get £2500 off.  Is it better to pay it off totally and not leave £100?  Correct me if I am wrong but I thought the settlement figure included 2 months of interest on the remaining balance, so the closing interest would based on £12K rather than the £100.  Hence the reason to leave £100, so that the 2 months of closing interest is based on £100.  Or have I misunderstood how it all works?

motorguy

As per the replies already, yes, take out the finance and pay it off a few days later, thus availing of the incentive.

Also use the broker sites such as drivethedeal and broadspeed.com to get the best price then ask your dealer to pricematch.  If they cant, then use the brokers.

motorguy

mustardseed6 said:

It's a Skoda Fabia 4.3% APR with £2500 paid towards the deposit is available.   So once I have negotiated a cash price, if I take the finance, I get £2500 off.  Is it better to pay it off totally and not leave £100?  Correct me if I am wrong but I thought the settlement figure included 2 months of interest on the remaining balance, so the closing interest would based on £12K rather than the £100.  Hence the reason to leave £100, so that the 2 months of closing interest is based on £100.  Or have I misunderstood how it all works?

If you clear it say 10 days later there will be no interest accrued (or virtually none).

They cant charge you a default amount of interest of say, 2 months.

You'll need to pay it all off.