car finance mis-selling for 0% finance from the dealership

english-setter

dunstonh said:

english-setter said:

So, if you have 0% finance for PCP, what’s to stop the dealership putting up the cost of the car to cover any (non-disclosed) interest charged by the lender they use and are therefore in cahoots with?

Its a common business model to run 0% finance when you want to sell cars closer or at to sticker price.

So how does the lender make their money? What’s in it for, say, Santander?

DullGreyGuy

english-setter said:

dunstonh said:

english-setter said:

So, if you have 0% finance for PCP, what’s to stop the dealership putting up the cost of the car to cover any (non-disclosed) interest charged by the lender they use and are therefore in cahoots with?

Its a common business model to run 0% finance when you want to sell cars closer or at to sticker price.

So how does the lender make their money? What’s in it for, say, Santander?

Because what they pay the retailer is less than the total value of the loan. 

It also depends on the precise nature of the deal, certainly in the furniture space it used to be fairly common to have 12 months 0% however if you failed to clear the debt in the 12 months then interest starts applying until such time as you clear it. Similarly there will be late payment fees etc payable. 

Obviously the idea from the retailer is that they take a hit on margin but have a big boost in sales that they wouldnt have secured were they selling with a 14% APR loan. With brand new cars it's often the manufacturer not the franchise dealer thats taking the hit. 

There are plenty more levers that can be pulled, like profit/loss shares, retailers the ones actually financing it and taking the risk but the bank putting their name, operations and licence to it in which case they get a fee etc. 

On a product that you dont typically just pay sticker price on but negotiate the retailer can take a tougher line on discounts whilst offering 0% APR to lessen the cost of the credit. 

dunstonh

english-setter said:

dunstonh said:

english-setter said:

So, if you have 0% finance for PCP, what’s to stop the dealership putting up the cost of the car to cover any (non-disclosed) interest charged by the lender they use and are therefore in cahoots with?

Its a common business model to run 0% finance when you want to sell cars closer or at to sticker price.

So how does the lender make their money? What’s in it for, say, Santander?

The lender makes money because the retailer pays the interest or pays a block fee for £x amount of borrowing.   This is then recouped by charging a higher price on the vehicle.

english-setter

Thanks. So, does that count as mis-selling in the context of what Martin’s currently talking about? 

MattMattMattUK

english-setter said:

Thanks. So, does that count as mis-selling in the context of what Martin’s currently talking about? 

No.       

paul_c123

english-setter said:

So, if you have 0% finance for PCP, what’s to stop the dealership putting up the cost of the car to cover any (non-disclosed) interest charged by the lender they use and are therefore in cahoots with?

Elasticity of demand will come into it at some point. The price of the car - and thus the total borrowed - is still known to the buyer, after all.

Put more simply, if you have two cars side-by-side, one is offered with a 0% finance deal at £40k and the other doesn't have a finance deal, but is £30k, they're going to twig. We are living in the information age, it is impossible  for the dealer to "hide" the prices of its competitors, or the price of nearly new cars on Auto Trader, etc.