Car finance. Not something I am familiar with. Advice please. 4 July 2022 at 9:00AM in Loans 10 replies 653 views

4jbl7

We are in the fortunate position of being able to spend between £25K to £40k on a replacement car.
I am long time retired so no work options, a personal purchase and I tend to keep my car for a long time (10 yrs plus not unusual) so not at all familiar with modern purchase methods.
In the past it was a straightforward bank loan to fund the cash purchase.
I believe that at the moment a cash purchase (trade in £13k-15k plus cash balance) is not at all likely to get me much of a discount on the dealers price as the dealer will make nothing extra from a cash sale.
I have never bought with a personal purchase plan but understand that the dealer will get a commission from the ppp and so the chance of a discount is more likely ?
Let's say that I can get a £1000 discount from a dealer if I take out finance but then after signing on the dotted line I immediately cancel the plan. The dealer still gets his commission but what are the likely charges to be from the ppp company for an early settlement. I realise this figure will be variable company to company but what is a possible  outcome ? Is this scenario even possible, I am totally new to this. Is it even ethical ?
Any advice would be appreciated.
Thanks
​​​​​​​Brian.

TadleyBaggie

Similar thread here: https://forums.moneysavingexpert.com/discussion/6369313/pcp-to-get-better-price-then-cancelling

4jbl7

TadleyBaggie said:

Similar thread here: https://forums.moneysavingexpert.com/discussion/6369313/pcp-to-get-better-price-then-cancelling

Thank you for the link. That answers some of the questions for me.
However, does anyone know what the penalty payment is for cancelling early or does the 14 day cooling off period not have a penalty clause for cancelling ? All new to me I'm afraid .
Cheers
Brian.

Penguin_

There's no real penalty, when I used to work in a car sales showroom, some customers would buy through finance & then pay the finance off 7 days later.

Nearlyold

4jbl7 said:

TadleyBaggie said:

Similar thread here: https://forums.moneysavingexpert.com/discussion/6369313/pcp-to-get-better-price-then-cancelling

Thank you for the link. That answers some of the questions for me.
However, does anyone know what the penalty payment is for cancelling early or does the 14 day cooling off period not have a penalty clause for cancelling ? All new to me I'm afraid .
Cheers
Brian.

The "Right to Withdraw" (Cancel) a credit agreement within 14 days was introduced by the European Consumer Credit Directive and enshrined in UK law by amendments to the Consumer Credit Act. If you withdraw from a credit agreement within 14 days there is no penalty, the only charge that will arise is interest (at the rate for your credit agreement) for the period the loan was in force. 

Once you have informed the Finance Company you wish to withdraw you have 30 days to repay the debt and you cannot change your mind.

The salesman/dealership will lose their finance commission.

4jbl7

Many thanks Nearlyold.
Perhaps I am somewhat naive but it seems a bit underhand to pretend to have a finance deal to get a possible discount and then repay and cancel the deal.
I think I'll just go trade in + cash for my own peace of mind.
Cheers
Brian.

DrEskimo

4jbl7 said:

Many thanks Nearlyold.
Perhaps I am somewhat naive but it seems a bit underhand to pretend to have a finance deal to get a possible discount and then repay and cancel the deal.
I think I'll just go trade in + cash for my own peace of mind.
Cheers
Brian.

If you really want, you can just run the finance for a set period of time and then settle, rather than cancel.

There's nothing stopping you making a substantial overpayment to reduce the balance, let it run for say 3-months and accrue minimal interest, then settle in full.

Then everyone wins.

Worth looking at the deals as it can be worth a fair bit. On my used car, once I had found one at a good price, the additional £1,000 deposit contribution and 2 free services made it a very good deal. This was openly advertised by the manufacturer so knew I could apply to any approved used car.

The dealership doesn't lose out as the contribution comes from the manufacturer, so the price of the car is the same. Also if you are just going to use cash, then the dealer loses out on the commission either way....

Albermarle

I bought a nearly new car about a year ago. I said to the dealer I prefer to pay cash as it was simpler ( and I was luckily cash rich ) but was worried that I would not get the best price. The dealer assured me they did not discriminate between cash and finance buyers on the price. Of course could have been a lot of blah blah, but throughout the buying process they behaved very well ( no pestering for extras etc ) so I was half inclined to believe them in the end . Or could be they just wanted to get the car sold either way. Don't forget that a cash sale is still a sale, even if it might be less profitable.

DrEskimo

Albermarle said:

I bought a nearly new car about a year ago. I said to the dealer I prefer to pay cash as it was simpler ( and I was luckily cash rich ) but was worried that I would not get the best price. The dealer assured me they did not discriminate between cash and finance buyers on the price. Of course could have been a lot of blah blah, but throughout the buying process they behaved very well ( no pestering for extras etc ) so I was half inclined to believe them in the end . Or could be they just wanted to get the car sold either way. Don't forget that a cash sale is still a sale, even if it might be less profitable.

I'm sure what the dealership offered me on the car was not dependent on the way I purchased it. I haggled the price down £300 and that was not contingent on how I bought it.

However there was no way they were also going to knock off a further £1,000 and offer me 2 free services. That was being offered by the manufacturer as a way of getting me t take out their finance (as they would have ad substantially more in interest).

Of course these offers are not available on all cars all of the time.

GentleGiant01

My last car purchase, I instructed them that I was happy to pay finance. Got myself a great deal on the car, and then decided to pay cash. 

Dealer wasn’t best impressed because she then tried to up the purchase price after agreeing to £17k and I wouldn’t go for it. Got the car for £17k and paid cash.  

MrFrugalFever

Hi.

Firstly a PCP arrangement is the most expensive way to purchase a vehicle should the entire term be completed.

secondly, each lender may differ slightly but you will pay interest, even with exercising your right to cancel within a 14 day cooling off period, this will be in the finance contract.

from a dealer perspective (not talking for all) the commission on a new car is minimal (yes, shock horror but it genuinely is and I’m talking £100) and will be withdrawn from the dealer if the finance is taken out and subsequently settled. You could, out of pure kindness, inform the dealer this is your intention.

You could, again depending on the circumstances, lose any finance deposit contribution from the manufacturer if finance is cancelled within 14 day cooling off period so I would make at least 1 months payment.

You may not be accepted for lending with that manufacturers lender again.

The dealership MUST not make the finance anymore attractive than what is outlined and set out from the start, this is incentivising and grossly against FCA regulations. A discount on the car should be the same regardless of purchase method.

I would not expect a big discount as it’s not the market for it.

Good luck with your purchase.