Zero interest finance or not?

zerofinance

I emailed – see below- the Money Saving Expert forum team and the response was:- We deal with issues reported to us from the Forum via our report button. Unfortunately due to the volumes of messages we receive every day the Forum Team aren't able to respond to individual messages. So here is my question:- Hello to you at Money Saving Expert Firstly fantastic work in providing so much information on "Car finance mis-selling". There is one aspect that does not get a mention and that is so called "zero interest finance deals" offered usually by main dealers. I am aware that MSE do not look into individual cases but I am merely asking in a general way when something like the following happens. Customer - I want to but a new car but need finance Dealer - well it just so happens we have access to "zero finance deals" provided by the manufacturers finance company - for instance Honda Motors Ltd have Honda Finance Ltd or some such arrangement. Customer - what does that mean Dealer - we get paid the money and you the customer make your monthly payments to the finance company. Of course at the time the customer thinks that's great but hang on a minute logic dictates it could not really be interest free so somehow someone earned something out of the process. I cannot think what but could there have been some sort of discount between manufacturer and dealer that was not brought to the attention of the customer - in other words some sort of Car Finance Mis-selling - what do you experts at MSE think?

dunstonh

How much do you think your interest rate was inflated due to commission?

Nearlyold

If you had 0% finance from the dealer then you obviously can't complain that you were charged a higher discretionay rate of interest by the dealer.

Nasqueron

Car finance mis-selling has 2 elements

DCA (obviously not applicable)
Excess commission (could be the case regardless of interest rates)

I am not sure what you're on about with the rest, clearly a 0% deal IS zero interest - your finance is say £25,000, pay £500 deposit, £18,500 in repayments, £6000 balloon = £25,000 repaid - if you paid more than that then something is funny. An official dealer offering manufacturer finance is saving money on paying fees to brokers/finance companies and logically they would get commission for it as that is how sales work. The only issue is if the commission was excessive which you'd have to ask them about in light of the recent court case

MyRealNameToo

Nasqueron said:

Car finance mis-selling has 2 elements

DCA (obviously not applicable)
Excess commission (could be the case regardless of interest rates)

I am not sure what you're on about with the rest, clearly a 0% deal IS zero interest - your finance is say £25,000, pay £500 deposit, £18,500 in repayments, £6000 balloon = £25,000 repaid - if you paid more than that then something is funny. An official dealer offering manufacturer finance is saving money on paying fees to brokers/finance companies and logically they would get commission for it as that is how sales work. The only issue is if the commission was excessive which you'd have to ask them about in light of the recent court case

Excess commission cannot apply because it still links back to the customer paying too much for finance because of the commission... the customer here is paying nothing for the finance. 

The OP is simply not understanding why a manufacturer would offer 0% finance and think that were they not offering 0% then rather than selling the car for £25,000 they would be able to sell it for £23,000. 

Ultimately manufacturers use it to boost sales in models that are flagging, the cost to them is significantly less than the normal APR. I think that most people would respond more positively to £25k @ 0% over 3 years than £23k @5.5% over 3 years even though the two are virtually identical in real terms. Secondly some may get finance elsewhere or pay in cash and therefore the manufacturer simply loses the extra £2k