Car finance - hidden commission payments
Discussion
KingNothing said:
What isn't alright, and I still don't see how a number on here are actually trying to justify it, that someone can present to a customer a regulated finance product as if its the best possible rate or deal available to that customers circumstances, all the while hiding behind the fact that, not only is it not the best rate that the customer is eligible for, that the supplying agent is personally manipulating those figures to ensure that they make a personal profit off purposefully signing the customer up to a worse product than one they could have had.
Provider of finance here, and have provided non regulated agreements reselling to large companies for their clients that work in a similar fashion, buy from Black Horse/Lombard at 2% (flat) they resell at 5%(flat) 3% margin on a 50k PCP type agreement is good profit, in a non regulated environment that is perfect fine, the finance margin becomes part of the profit, and in certain cases the finance provider may not even be linked to the supply of goods, so its there advance (and subsequent profit) at the full risk of default.Regulated consumer credit, no chance, non disclosed commissions (or at least amounts not shown) are a total no no, good post KingNothing. Regulated agreements commissions shown.
They will get the book thrown at them.
Deesee said:
Provider of finance here, and have provided non regulated agreements reselling to large companies for their clients that work in a similar fashion, buy from Black Horse/Lombard at 2% (flat) they resell at 5%(flat) 3% margin on a 50k PCP type agreement is good profit, in a non regulated environment that is perfect fine, the finance margin becomes part of the profit, and in certain cases the finance provider may not even be linked to the supply of goods, so its there advance (and subsequent profit) at the full risk of default.
Regulated consumer credit, no chance, non disclosed commissions (or at least amounts not shown) are a total no no, good post KingNothing. Regulated agreements commissions shown.
They will get the book thrown at them.
But the requirement was to disclose commission could be paid and amount only had to be disclosed if consumer asked ? Regulated consumer credit, no chance, non disclosed commissions (or at least amounts not shown) are a total no no, good post KingNothing. Regulated agreements commissions shown.
They will get the book thrown at them.
KingNothing said:
Don't think you'll find many finance agreements which feature in the paperwork:
13.9% APR You're actually eligible for 3.9% APR, but we've handed control of setting the rate over to the salesperson, who; on a sliding scale will get a commissioned bonus for every point above 3.9% he can get you into signing up for, all the while portraying the APR as set in stone best possible interest rate you're eligible for, and omitting he gets a bonus for getting you above the best possible rate you're eligible for.
Don't think you'll find many car order forms which feature in the paperwork:13.9% APR You're actually eligible for 3.9% APR, but we've handed control of setting the rate over to the salesperson, who; on a sliding scale will get a commissioned bonus for every point above 3.9% he can get you into signing up for, all the while portraying the APR as set in stone best possible interest rate you're eligible for, and omitting he gets a bonus for getting you above the best possible rate you're eligible for.
£20,000 sale price You're actually eligible for buy the car for £18,500, but we've handed control of setting the price over to the salesperson, who; on a sliding scale will get a commissioned bonus for every £1 of extra profit he can get you into signing up for, all the while portraying the price as set in stone best price you're eligible for, and omitting he gets a bonus for getting you above the best possible price you're eligible for.
79.3x86.4 said:
But the requirement was to disclose commission could be paid and amount only had to be disclosed if consumer asked ?
My risk and compliance guru would disagree, we added ours in the IDD and documentation in bold for regulated agreements.TBF the vast majority of docs we produce are non-regulated, but for things like directors cars/wifes cars we would do, I do remember a particular one for a new (at the time) PCP on a 612, where the client balked at the commissions, we did point out we were 1.5% flat lower than the Ferrari Dealer (and subsequently lower monthly payment).... such was the business he place with us regularly for commercial items.
TBF we had own funds/credit lines that we had personal unlimited guarantees for so very much risk reward and we would charge according to asset and ultimate ability to repay.
I’m not taking any sides here, just my thoughts.
The strange thing about this is the retrospective aspect of it.
It was normal practice for dealers to use volume buying power to agree to supply the finance companies with millions of pounds of advances, they would be given a base rate X%, they would then add their margin Y%, and sell out to the customer at Z% amount. This margin could differ in every deal done depending on how educated the customer was.
That’s just the way the industry operated. When you think about it, it’s the way most industries/businesses operate. Buy in volume, add margin, sell out to customer if the customer thinks its value/wants to buy it.
The FCA looked into this situation and deemed the old system morally wrong and introduced new legislation in 2021 this fixed the rate that the dealer can give the customer, one APR for everyone. The dealer is still buying in at X, adding margin Y and selling at Z, that’s the current system put in place by the FCA to this day. Given it’s no longer variable per customer it’s slightly fairer as it doesn’t discriminate for stupidness, but it’s almost exactly the same thing.
All the lenders and dealers were and are complying with all legislation at the time.
If the FCA allow backdated claims is that really correct?
How would you feel doing 50mph on a 50 limit road, a week later its changed to a 30mph limit and they then try and charge you with speeding for the previous week?
Very weird.
The strange thing about this is the retrospective aspect of it.
It was normal practice for dealers to use volume buying power to agree to supply the finance companies with millions of pounds of advances, they would be given a base rate X%, they would then add their margin Y%, and sell out to the customer at Z% amount. This margin could differ in every deal done depending on how educated the customer was.
That’s just the way the industry operated. When you think about it, it’s the way most industries/businesses operate. Buy in volume, add margin, sell out to customer if the customer thinks its value/wants to buy it.
The FCA looked into this situation and deemed the old system morally wrong and introduced new legislation in 2021 this fixed the rate that the dealer can give the customer, one APR for everyone. The dealer is still buying in at X, adding margin Y and selling at Z, that’s the current system put in place by the FCA to this day. Given it’s no longer variable per customer it’s slightly fairer as it doesn’t discriminate for stupidness, but it’s almost exactly the same thing.
All the lenders and dealers were and are complying with all legislation at the time.
If the FCA allow backdated claims is that really correct?
How would you feel doing 50mph on a 50 limit road, a week later its changed to a 30mph limit and they then try and charge you with speeding for the previous week?
Very weird.
KingNothing said:
I've no doubt this was filtered down from the lenders themselves, and/or senior management at dealers as a further incentive to sell vehicles and sell finance arrangements, so I can understand why you're advocating for salesmen to a degree, but ultimately it was those salesmen taking money directly out of the pockets of customers to line their own; that is the whole scenario in its purest and simplest boiled down form, people can come and do whataboutery and whatif's, but long story short, the salesmen had the chance not to screw over people by simply giving them the deals they were eligible to at the personal cost of getting a better commission payment and as it's been found out, some (not all) have taken the opportunity to make more money and grabbed it with both hands.
Extracting as much money out of a customer while keeping said customer happy (be that a business or an individual) for the benefit of their employer - and often themselves via commission - is the primary function of every salesperson, everywhere - in every industry. There is nothing scummy about that. At the level of a car sales person I would expect the sales process and training set out by the business to avoid any illegal practices. In this case that has clearly not happened.
Not read the thread but i'll submit my details for a M2 I bought in 2018 (used, pre-reg) from a BMw dealer so using BMW FS.
On digging out the emails/agreement it seems it's quoted as Hire Purchase but it has an 'Optional final repayment' (£26k so not the option to purchase small fee).
Does this sound normal as it's very much a PCP type repayment format???
On digging out the emails/agreement it seems it's quoted as Hire Purchase but it has an 'Optional final repayment' (£26k so not the option to purchase small fee).
Does this sound normal as it's very much a PCP type repayment format???
duckson said:
Not read the thread but i'll submit my details for a M2 I bought in 2018 (used, pre-reg) from a BMw dealer so using BMW FS.
On digging out the emails/agreement it seems it's quoted as Hire Purchase but it has an 'Optional final repayment' (£26k so not the option to purchase small fee).
Does this sound normal as it's very much a PCP type repayment format???
You can get HP with a ‘bubble’, the final payment is not optional however ! the key phrase you are looking for is regulated by consumer credit act 1974.On digging out the emails/agreement it seems it's quoted as Hire Purchase but it has an 'Optional final repayment' (£26k so not the option to purchase small fee).
Does this sound normal as it's very much a PCP type repayment format???
sugerbear said:
pork911 said:
phpe said:
The only view that matters is that of the regulator, the FCA.
jaw droppingYou also appear to be linking the price of the car with the finance agreement, it's solely the finance agreement that is the issue which has nothing to do with the stciker price the buyer paid on the forcourt, dealers still made good money on those cars and the part exchanges. The sticker price of the car doesn't change if you are paying cash, bank transfer or taking finance (generalluy. But it does change for these finance deals becuase they, the broker lumped, on a commission payment that they didn't disclose to the buyer.
If you are worrried about future finance deals becoming unaffordale there are other dealerships / finance firms that wont be impacted by these claims so just buy from one of those. The market at work.
am not worried about future finance, never used it and never will, i can afford what I buy,
and have no desire either to affect a compo sad face
as for sticker prices, they lost much direct connection with the product long ago due to the proliferation of finance and so the monthlies becoming the real ticker and the need therefore to make them look good value by upping the sticker price
Deesee said:
duckson said:
Not read the thread but i'll submit my details for a M2 I bought in 2018 (used, pre-reg) from a BMw dealer so using BMW FS.
On digging out the emails/agreement it seems it's quoted as Hire Purchase but it has an 'Optional final repayment' (£26k so not the option to purchase small fee).
Does this sound normal as it's very much a PCP type repayment format???
You can get HP with a ‘bubble’, the final payment is not optional however ! the key phrase you are looking for is regulated by consumer credit act 1974.On digging out the emails/agreement it seems it's quoted as Hire Purchase but it has an 'Optional final repayment' (£26k so not the option to purchase small fee).
Does this sound normal as it's very much a PCP type repayment format???
Yes it has the phrase along the top.
Many people who use finance can afford to buy what they're buying, either by having the cash in hand or being able to service the ongoing payments. However we all like a bit of snobbery with our internet reading, bravo!
Lots of leasing over the past few years has meant you can rent (gosh, how common!) your new wagon for 2 or 3 years for less than the cost of depreciation, had you bought it with the King's finest.
Lots of leasing over the past few years has meant you can rent (gosh, how common!) your new wagon for 2 or 3 years for less than the cost of depreciation, had you bought it with the King's finest.
Forester1965 said:
OddCat said:
You are selling a car and you're hoping to get £17,500 for it. You advertise it at £20,000.
Someone comes along and offers you £20,000. Do you say "that's great but I was actually hoping for £17,500. I'm not going to penalise your hopeless negotiating skills so you can have the car for £17,500"
That's the wrong way around. Someone comes along and offers you £20,000. Do you say "that's great but I was actually hoping for £17,500. I'm not going to penalise your hopeless negotiating skills so you can have the car for £17,500"
It's more like you want £20k for the car and the buyer rocks up in a Bentley so suddenly you change the sticker price to £25k 'because reasons'.
FamousPheasant said:
Extracting as much money out of a customer while keeping said customer happy (be that a business or an individual) for the benefit of their employer - and often themselves via commission - is the primary function of every salesperson, everywhere - in every industry. There is nothing scummy about that.
Quite. From the buyer's perspective, it's up to them to look at the options (different cars and what the payments are for them) and work out what is the best deal for them. The job of the business (all businesses) is to maximise profit. What another customer paid, or how much profit the business made, isn't really the customer's concern. If he can get a better deal elsewhere, go and do that. If he's happy with what he is paying for what he is buying, no problem.I bought a bottle of Vodka in Sainsburys for £28 and the following week it's on special offer for £25, so have I been 'ripped off'?
After all, it was never disclosed to me how much profit was in that bottle for Sainsburys, it's clearly an amount they can vary up or down, and obviously they COULD have sold it to me for less, but chose to charge me more, just to 'line their own pockets', as someone further up the thread put it regarding finance interest rates.
Where do I claim?
KingNothing said:
pork911 said:
am on no one's side, certainly not when considering salesman v finance addicts
am not worried about future finance, never used it and never will, i can afford what I buy,
and have no desire either to affect a compo sad face
am not worried about future finance, never used it and never will, i can afford what I buy,
and have no desire either to affect a compo sad face
Well, Bully for you.
just like choices of being in debt so not able to make pension contributions to the correct level to keep hold of child benefit, yet still entering car lotteries
Edited by pork911 on Friday 9th February 13:23
Forester1965 said:
Lots of leasing over the past few years has meant you can rent (gosh, how common!) your new wagon for 2 or 3 years for less than the cost of depreciation, had you bought it with the King's finest.
No you can't, the only person paying the depreciation on their car is the person who owns it, however the figures are arranged to make you believe otherwise.You don't seriously believe that finance companies are cheerfully paying for the depreciation on your PCP'ed car sat on your drive and charging you less than it's depreciating do you? How could that possibly work?
Perhaps this will be the next mis-selling claim.
Ari said:
No you can't, the only person paying the depreciation on their car is the person who owns it, however the figures are arranged to make you believe otherwise.
You don't seriously believe that finance companies are cheerfully paying for the depreciation on your PCP'ed car sat on your drive and charging you less than it's depreciating do you? How could that possibly work?
Perhaps this will be the next mis-selling claim.
The comparison is between what a consumer would pay for it cash versus lease.You don't seriously believe that finance companies are cheerfully paying for the depreciation on your PCP'ed car sat on your drive and charging you less than it's depreciating do you? How could that possibly work?
Perhaps this will be the next mis-selling claim.
A consumer can't get the same volume cash discount a finance company can. My last lease car listed at over £35k and Santander paid £23k for it (I had to sign the invoice at the dealership on collection). I couldn't have got that car for £23k. I was paying £700 up front and £170pm for 2 years. If you think I'd have lost less than £5k on a boggo Volvo estate in 2 years I have many bridges to sell you at varying rates of APR!
Ari said:
No you can't, the only person paying the depreciation on their car is the person who owns it, however the figures are arranged to make you believe otherwise.
You don't seriously believe that finance companies are cheerfully paying for the depreciation on your PCP'ed car sat on your drive and charging you less than it's depreciating do you? How could that possibly work?
Perhaps this will be the next mis-selling claim.
I'm still waiting for the first mis-buying scandal. Where a company can claim some more money from a client for whom they stupidly did loss making deal...You don't seriously believe that finance companies are cheerfully paying for the depreciation on your PCP'ed car sat on your drive and charging you less than it's depreciating do you? How could that possibly work?
Perhaps this will be the next mis-selling claim.
I'll shamefully say that when I was younger and naive and wanting a shiny new car I wasn't aware that multiple loan APR's would be available to me as a purchaser, it was all about getting the price per month down.
If however I was presented with a number of APR's from lenders who I was suitable with in front of me then that would had been different, except I was given a monthly payment & APR and told it was the best they could do.
I actually feel rather annoyed seeing what is being talked about this week as the way dealers were always structured with a Salesman talking about the latest version of cruise control knobs and then him palming me onto a "finance manager" you dealt with now makes sense, along with the tireless number of times they needed to "speak to a manager" which presumably was some sort of approval on what I was being mugged off with.
Could this also explain better "times of the year/month" to be getting better deals along with competition within a dealership where they'd be getting commission for bonuses and how this was impacting my costs?
If however I was presented with a number of APR's from lenders who I was suitable with in front of me then that would had been different, except I was given a monthly payment & APR and told it was the best they could do.
I actually feel rather annoyed seeing what is being talked about this week as the way dealers were always structured with a Salesman talking about the latest version of cruise control knobs and then him palming me onto a "finance manager" you dealt with now makes sense, along with the tireless number of times they needed to "speak to a manager" which presumably was some sort of approval on what I was being mugged off with.
Could this also explain better "times of the year/month" to be getting better deals along with competition within a dealership where they'd be getting commission for bonuses and how this was impacting my costs?
Sadly, the motor trade is not covering itself in glory when it comes to abiding with the spirit and rules of FCA regulations. You'd think they'd learn.
Even today, more news about GAP insurance sales halted by insurers and dealers, due to significant concerns about how it is sold
https://www.am-online.com/news/finance/2024/02/09/...
In recent months, Concerns about social media and financial promotion rules and dealers making misleading ads
https://www.am-online.com/news/finance/2023/07/17/...
There's lots more - I can't be bothered linking to them all.
As an aside, Mrs phpe has a personal lease car deal that expires in December 2024 and upon checking a settlement figure, I saw that I can change any time this year without penalty/additional payment so thoughts are turning to what to replace it with. We're in a position to "pull the trigger" anytime and can afford to either buy a new/used car outright with our own savings or perhaps look at a new PCP/used PCP or maybe another personal lease. Undecided yet about what's right for us.
I made an enquiry about a used car she likes the look of from one local dealer of the biggest brands in the UK - the salesman was extremely keen to provide a monthly PCP quote (without knowing my circumstances or needs), has given a monthly repayment figure taken as a screenshot from WhatsApp and hasn't disclosed the APR or final repayment figure, and was more keen instead to provide a blurry low-resolution CitNow video taken on an potato and to contact him after his day off. Hardly professional, and has said he's loaded the figures already with paint protection and service plans, etc. The sort of guy that if I shook his hand, I'd count my fingers afterwards/
I made an enquiry on a new car from another local dealer for another big brand - salesman provided a really clear explanation of some of the likely deals & incentives, suggested it would be much better to come in for an appointment to go through the numbers properly, see what stock might be available and has come across (so far) as likeable and professional.
Guess which one I'll be going to see this weekend...
Even today, more news about GAP insurance sales halted by insurers and dealers, due to significant concerns about how it is sold
https://www.am-online.com/news/finance/2024/02/09/...
In recent months, Concerns about social media and financial promotion rules and dealers making misleading ads
https://www.am-online.com/news/finance/2023/07/17/...
There's lots more - I can't be bothered linking to them all.
As an aside, Mrs phpe has a personal lease car deal that expires in December 2024 and upon checking a settlement figure, I saw that I can change any time this year without penalty/additional payment so thoughts are turning to what to replace it with. We're in a position to "pull the trigger" anytime and can afford to either buy a new/used car outright with our own savings or perhaps look at a new PCP/used PCP or maybe another personal lease. Undecided yet about what's right for us.
I made an enquiry about a used car she likes the look of from one local dealer of the biggest brands in the UK - the salesman was extremely keen to provide a monthly PCP quote (without knowing my circumstances or needs), has given a monthly repayment figure taken as a screenshot from WhatsApp and hasn't disclosed the APR or final repayment figure, and was more keen instead to provide a blurry low-resolution CitNow video taken on an potato and to contact him after his day off. Hardly professional, and has said he's loaded the figures already with paint protection and service plans, etc. The sort of guy that if I shook his hand, I'd count my fingers afterwards/
I made an enquiry on a new car from another local dealer for another big brand - salesman provided a really clear explanation of some of the likely deals & incentives, suggested it would be much better to come in for an appointment to go through the numbers properly, see what stock might be available and has come across (so far) as likeable and professional.
Guess which one I'll be going to see this weekend...
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