withdraw or settle from finance

charlie_1988UK

I have just been given a great finance deal for a used merc. my plan is to pay off the finance early so I can keep the benefits and not pay the interest. I know I can withdraw in 14 days of the agreement but what is the difference between that and settling it. will I keep my benefits of service plan and warranty or will the dealer take them away? whats the difference between withdrawing within 14 days and paying the remainder to buy the car compared to just settling after the withdrawl period?

Goudy

I heard it go both ways. Some have kept the benefits and others not.

Officially these benefits are attached to the finance agreement you sign, so there is nothing to stop them withdrawing them if you cancel the finance.

It seems more likely to keep them if you've collected the car and benefits within those 14 days and then cancelled and paid the finance company for the car. But there's no guarantee unless you take the finance and settle.

If these benefits are attached to new car finance or you signed up and had to wait for the car a while, they could just issue you with a new invoice that you pay the dealer and if you want the benefits, you pay for them.

You can let the finance agreement start and settle it at anytime and all they can charge you is a maximum of 56 days interest of the outstanding capital if it's consumer credit and not business. Consumer credit is covered by the consumer credit act. Larger amounts attract 56 days and lower amounts around 30 days.

You should be able to work out this 56 days interest and if the benefits are worth a lot more money than that and you don't what to risk it, they settle after the 14 days but in the first month.

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/6671711/withdraw-or-settle-from-finance

AIUI, if you withdraw / cancel the finance agreement then it is as though the finance never existed. It may be that the "incentives" associated with the finance also get withdrawn in that case. They may not, but withdrawing the incentives is equal to withdrawing the finance deal.

Alternatively, if you settle the finance early, then you may incur the interests costs for 2 months, but the finance has actually come into being and the associated incentives are linked to something that exists.

jimjames

For my VW agreement I withdrew from it and it doesn't show on credit report. There were 30 days to pay once I'd requested to withdraw but the interest stopped at the point I requested it. If you settle it you will pay the full interest due so it will cost more. I've retained all the incentives that were offered with the finance agreement.

charlie_1988UK

my worry is that they remove the extra incentives if I withdraw. what would the best course of action be in this case?

Frozen_up_north

In all likelihood the perks will be cancelled too. Some finance perks amount to a significant amount if purchased separately.

Having suggested that, I bought a new car outright 18 months ago, the dealer added perks and additionally discounted the windscreen price by £4K on a £32K car. That was without haggling. Must have been a lean month for sales, and it was near the end of November.

So maybe looking disinterested might get you the same perks for “cash”

paul_c123

Everyone is guessing. You need to do your own research, reading the small print, to be sure.

Iceweasel

Why not simply ask the dealer?

I bought a used BMW on finance with a whole load of offers and incentives.

I paid off the finance after 2 weeks and it had no effect on the free servicing etc. that was included.

jimjames

https://forums.moneysavingexpert.com/discussion/comment/82028842#Comment_82028842

Examples above are for VW & BMW that haven't been removed. I've not seen any examples where they've been cancelled. If that happens then apart from continuing the finance there isn't anything you can do.

Grumpy_chap

I think we have seen threads where individuals have asked the dealer and the dealer has said to keep the finance active for a couple of months before closing it down. That would negate the option to withdraw and settle would then mean incurring 4 months' interest in total.

I have never been that sure that the sales staff at the dealer either know the actual answer and just making up a response. What I am certain is that the sales staff at the dealer will be focused on securing their commission for selling the finance so may not be best placed to give independent comment.

Goudy

https://forums.moneysavingexpert.com/discussion/comment/82028842#Comment_82028842

To be certain, settle the finance after the 14 day cooling off period. So don't withdraw or cancel it as that is where the risk is regarding the benefits.

The finance company will adjust the interest on the outstanding capital to include only 56 days interest on what was borrowed (not 56 days PLUS the total of the repayments due as that already includes a sh*t load of interest, it's just 56 days AND the capital borrowed), then usually give you a date to pay it by.

They may include a settlement fee, usually a few quid for "paperwork" but that should be stated in your finance contract under the early settlement section.

This adjustment of interest is usually called a interest rebate, but it's set out in the Consumer Credit Act 1974 that that 56 days is all they can charge you on larger loans.

If you are wise, you can manipulate this 56 days by increasing the deposit you put down on the car. This obviously lowers the amount of capital you borrow, so the 56 days interest will be less.

I've done this myself many times. Buy a car on what usually is a PCP deal with incentives, these are usually large discounts through various schemes related to my employer but they are all attached to taking finance.

Put down as large a deposit as allowed with the finance package which is usually around 30% or so on a PCP arrangement. This leaves 70% plus interest as finance.

I then settle this 70% within the first month and only pay the 56 days interest on that 70%. This is always far less than the incentive to take the finance.

You can work out what the 56 days interest would be easy enough to see if it's worthwhile.

Capital borrowed times APR divided by 365 gives a daily rate. Then times that by 56.