PCP Auto finance versus 0% purchase card?

paulcam

I have ordered a new motorcycle.  Cash price is about £8000 otr.

Dealership offers HP and PCP, or cash/card of course.  However, the interest rate is pretty much 5%.  5% on the depreciation value of the bike, results in around £850 cost of credit over 3 years.

I have a good credit rating and both the application for PCP finance AND 0% 24 month £5k limit card are approved.  I could also technically pay cash by debit card, but that would damage my ISA reserves.

So ... if as I have not signed the finance agreement in full, only pre-approval, I can back out of the deal.  I can even get my £1k down payment towards deposit back in full.

I could push the cash from current/savings to £3k and pay the rest on the 0% card - having read ALL the small print first.  I then have 2 years of interest free credit.  And £5k to settle in that time.  That makes monthly repayments £208pm to clear it.  However it's a securable debt with an asset backing it.  I don't see me falling into negative equity on the bike, unless I crash it in the first few months and get a rubbish insurance pay out.

So I am effectively financing my own PCP using a 0% credit card.   I can, before the 0% term runs out, sell the bike, settle the card and still have equity left over to do it again.

If I really like the bike and want to keep it beyond those 2 years, I either pay the balance out of reserves or I balance transfer it to a 0% balance card.  (RISK: You can't guarantee future offers or approvals or reserves for that matter).

The important part is, given I'm putting in £3k cash, the bike should remain in positive equity and I can get out of the whole arrangement with the seat of my pants still intact.

Does all of this make sense and have I missed any "gotchas"?

[Deleted User]

Does the dealer accept credit cards for the amount you need?

paulcam

Deleted_User said:

Does the dealer accept credit cards for the amount you need?

That is a good question.  I believe they should accept credit cards.  A point to note if they don't or refuse is they are most likely trying to get around the Section 75 rights.  Only a dodgy dealer would do that.

However, they could have a limit on CC payments.  I will obviously ensure they understand I'm paying partly by card when making the deal.

Spoke to the credit card company and while they cannot give financial advice they did confirm the offer conditions and limitations, which I am comfortable with.

ItsComingRome

paulcam said:

Deleted_User said:

Does the dealer accept credit cards for the amount you need?

That is a good question.  I believe they should accept credit cards.  A point to note if they don't or refuse is they are most likely trying to get around the Section 75 rights.  Only a dodgy dealer would do that.

However, they could have a limit on CC payments.  I will obviously ensure they understand I'm paying partly by card when making the deal.

Spoke to the credit card company and while they cannot give financial advice they did confirm the offer conditions and limitations, which I am comfortable with.

No, it's a dealer trying to save money by not paying the relatively high transaction fees for credit cards vs any other payment method.

They're not involved in the S75 process at all, as that is a claim against your bank.

paulcam

ItsComingRome said:

No, it's a dealer trying to save money by not paying the relatively high transaction fees for credit cards vs any other payment method.

They're not involved in the S75 process at all, as that is a claim against your bank.

I read that when purchasing on CC from someone the risk on the debt if anything goes wrong is part shared by the retailer and your credit card company.  

Which basically means, if you return the items for a good reason within a reasonable time, you can cash back the sale price off the card while the disputes take place.  If you are found within your rights to return the item and cash back the sales money, any financial impact of that is take by the credit card and the dealer and not you.

But I stress, this was MY understanding of it and I could be wrong.

My understanding is based on the purpose of the regulation, which is to stop retailers and credit card companies from allowing people to over purchase and force themselves into debt and in the same process making it harder to get back out of that debt if you change your mind after the fact.

By making the retailer and the credit card company partly liable for financial costs that cannot be transferred to the customer, tries to stop them from allowing people to ramp up debts and then make it difficult or financially problematic to want back out.

So if you walk away with a £7000 motorcycle and decide you want out within a sensible period, their might be financial implications.  Restocking the bike - used - even though fairly returned could cost you £2000.  Fees and charges for doing so, might mean you can't afford to get out.  Section 75 tries to address that by making it easier to get back out of credit card debt without being stung with large fees as a barrier to settling or returning.

It also means if you default the agreement by any other means, that both the credit card company AND the retailer share the bad debt they then inherit.

ItsComingRome

paulcam said:

ItsComingRome said:

No, it's a dealer trying to save money by not paying the relatively high transaction fees for credit cards vs any other payment method.

They're not involved in the S75 process at all, as that is a claim against your bank.

I read that when purchasing on CC from someone the risk on the debt if anything goes wrong is part shared by the retailer and your credit card company.  

Which basically means, if you return the items for a good reason within a reasonable time, you can cash back the sale price off the card while the disputes take place.  If you are found within your rights to return the item and cash back the sales money, any financial impact of that is take by the credit card and the dealer and not you.

But I stress, this was MY understanding of it and I could be wrong.

No, an S75 claim is solely against your bank.

If they were"dodgy" they'd refuse to accept cards at all as they're open to a chargeback on both debit or credit card (which would cost them if they lost it.)

Vehicle dealerships almost always refuse to allow full payments on cards because of their fees.  For example, with a fairly average fee of 3% on a credit card, your transaction will cost them £240 in fees.  A debit card would probably cost them less than a quid.  Not difficult to see why they won't want to allow full payment on a CC.

[Deleted User]

paulcam said:

ItsComingRome said:

No, it's a dealer trying to save money by not paying the relatively high transaction fees for credit cards vs any other payment method.

They're not involved in the S75 process at all, as that is a claim against your bank.

But I stress, this was MY understanding of it and I could be wrong.

Yes, that is a little bit wrong.

S75 means that the card is equally liable, not that liability is shared. Nothing to do with cash back, it's just another route to pursue a refund if the retailer is at fault. 

The dealer won't care whether you have s75 protection or not. The decision to accept cards is purely a commercial one.  They can sell cars at the lowest price to get the most sales, or choose to accept them (and increase prices slightly to cover the cost) if they believe they'll attract more customers that way.

Some will take a middle road and allow you to put a small amount on a card, to attract those who want s75, without the need to increase prices noticeably.

paulcam

In short that (CC charges) would limit my buying power for negotiation.  So I would lose the "cash sale" advantage as not only are they taking a hit on CC charges, but they are losing out on the finance commission.