Car finance - hidden commission payments
Discussion
Dixy said:
Yet again people who could not be arsed to read the contract or negotiate properly are screaming "its not fair".
Hold the front page, car dealers tried to be profitable and made up on the swings what they missed out on the slide.
This money has not been sat in a suspense account for the last 20 years. It will have to come out of future profits. All of us that were prudent in the past will in future be subsidising those that were not.
Its not a case of people not being able to read or indeed not being able to negotiate though - the clue is in the " hidden " bit.Hold the front page, car dealers tried to be profitable and made up on the swings what they missed out on the slide.
This money has not been sat in a suspense account for the last 20 years. It will have to come out of future profits. All of us that were prudent in the past will in future be subsidising those that were not.
Dixy said:
They signed a contract with the rate and figures clearly on it. The only hidden bit was who made what from it.
Indeed but that's the whole point which is why the FCA outlawed the practice in late 2021.The hidden part relates to the fact that " other " cheaper rates may well have been available.
The fact that some cannot negotiate ( and you are absolutely right in this aspect ) just means they are being potentially compensated ,but the behaviours of others is not necessarily pertinent.
Customer walks into the showroom to buy a used car.
They choose a car of interest. It has;
- £1,000 profit at the full list price. However the customer negotiates £400 off, leaving the dealer £600 profit.
- The dealer has an advertised APR of 12.9% which generates them £1000 income. The customer negotiates this down to 7.9% which leaves the dealer £600 profit.
Neither ‘hidden’ commission or profit is disclosed to the customer.
What’s the difference? Why is one fair and the other isn’t?
They choose a car of interest. It has;
- £1,000 profit at the full list price. However the customer negotiates £400 off, leaving the dealer £600 profit.
- The dealer has an advertised APR of 12.9% which generates them £1000 income. The customer negotiates this down to 7.9% which leaves the dealer £600 profit.
Neither ‘hidden’ commission or profit is disclosed to the customer.
What’s the difference? Why is one fair and the other isn’t?
but nothing to do with the details.em177 said:
Customer walks into the showroom to buy a used car.
They choose a car of interest. It has;
- £1,000 profit at the full list price. However the customer negotiates £400 off, leaving the dealer £600 profit.
- The dealer has an advertised APR of 12.9% which generates them £1000 income. The customer negotiates this down to 7.9% which leaves the dealer £600 profit.
Neither ‘hidden’ commission or profit is disclosed to the customer.
What’s the difference? Why is one fair and the other isn’t?
The advertised APR is "representative". There are rules around that figure and banks/ finance companies have to report the rates that people actually received to ensure they dont lump everyone with 20% despite the representative rate. They choose a car of interest. It has;
- £1,000 profit at the full list price. However the customer negotiates £400 off, leaving the dealer £600 profit.
- The dealer has an advertised APR of 12.9% which generates them £1000 income. The customer negotiates this down to 7.9% which leaves the dealer £600 profit.
Neither ‘hidden’ commission or profit is disclosed to the customer.
What’s the difference? Why is one fair and the other isn’t?
The difference here is that is wasn't the finance company setting the rate, it was the dealership,. Sounds to me like that is the issue because there is a clear conflict of interest and they were not treating all customers fairly.
FCA rules..
em177 said:
Customer walks into the showroom to buy a used car.
They choose a car of interest. It has;
- £1,000 profit at the full list price. However the customer negotiates £400 off, leaving the dealer £600 profit.
- The dealer has an advertised APR of 12.9% which generates them £1000 income. The customer negotiates this down to 7.9% which leaves the dealer £600 profit.
Neither ‘hidden’ commission or profit is disclosed to the customer.
What’s the difference? Why is one fair and the other isn’t?
Its the fact that the dealer had potentially a lower rate of interest from the Finance company to offer the customer but as they were then taking the difference in that hidden commission and I guess potentially also advising said customer that there was nothing else they could do to the rate is the part that the FCA has objected to.They choose a car of interest. It has;
- £1,000 profit at the full list price. However the customer negotiates £400 off, leaving the dealer £600 profit.
- The dealer has an advertised APR of 12.9% which generates them £1000 income. The customer negotiates this down to 7.9% which leaves the dealer £600 profit.
Neither ‘hidden’ commission or profit is disclosed to the customer.
What’s the difference? Why is one fair and the other isn’t?
Its not a case of fair or not its a case of what the regulations are.
But clearly its early days so none of us really know the extent or quantum.
Sheepshanks said:
I always take PCP to get discounts then Withdrew from them - can I still claim?
I did letone run, but that was 0%. I guess somewhere in the deal that must have been funded. Shall I whack in a claim for that?
PCP agreements are included within this " investigation " although I assume you would have had to actually pay some interest in order to potentially qualify ?I did letone run, but that was 0%. I guess somewhere in the deal that must have been funded. Shall I whack in a claim for that?
0% deals are not included for the same reason.
Sheepshanks said:
I always take PCP to get discounts then Withdrew from them - can I still claim?
I did letone run, but that was 0%. I guess somewhere in the deal that must have been funded. Shall I whack in a claim for that?
Yes to the first one if you paid any interest. I did letone run, but that was 0%. I guess somewhere in the deal that must have been funded. Shall I whack in a claim for that?
No to the 2nd one. Its in the guidence notes.
Dixy said:
Yet again people who could not be arsed to read the contract or negotiate properly are screaming "its not fair".
Hold the front page, car dealers tried to be profitable and made up on the swings what they missed out on the slide.
This money has not been sat in a suspense account for the last 20 years. It will have to come out of future profits. All of us that were prudent in the past will in future be subsidising those that were not.
It does have whiff of another helicopter drop for the masses again...Hold the front page, car dealers tried to be profitable and made up on the swings what they missed out on the slide.
This money has not been sat in a suspense account for the last 20 years. It will have to come out of future profits. All of us that were prudent in the past will in future be subsidising those that were not.
I'm going to send in an email for a Focus we bought for my wife a good few years ago although I do recall at the time I had a pretty heated discussion with the dealers sales manager when they offered HP finance at some silly rate then I went away and found cheaper with a bank so they came back and then offered same as the bank were going to give after some fairly bad attitude from them and me threatening to cancel the purchase.
Maybe I got the best rate at the time in the end.
Maybe I got the best rate at the time in the end.
Jamescrs said:
I'm going to send in an email for a Focus we bought for my wife a good few years ago although I do recall at the time I had a pretty heated discussion with the dealers sales manager when they offered HP finance at some silly rate then I went away and found cheaper with a bank so they came back and then offered same as the bank were going to give after some fairly bad attitude from them and me threatening to cancel the purchase.
Maybe I got the best rate at the time in the end.
You will only know if you ask, 40% chance of it so not everyone is going to be impacted.Maybe I got the best rate at the time in the end.
It is to be hoped that the banks had 'in the event of a dispute' claw back agreements in their contracts with the motor traders. It is the trader who effectively retained any 'unacceptable additional interest' monies.
Not sure whether the FCA can be trusted to determine what amount was acceptable without explicit disclosure. If they say 'none of it' (which is entirely possible) then god knows how many other types of completely unrelated contracts could also come into the spotlight.
Perhaps people think finance brokers operate for free and are paid by the car fairies ?
Not sure whether the FCA can be trusted to determine what amount was acceptable without explicit disclosure. If they say 'none of it' (which is entirely possible) then god knows how many other types of completely unrelated contracts could also come into the spotlight.
Perhaps people think finance brokers operate for free and are paid by the car fairies ?
em177 said:
Customer walks into the showroom to buy a used car.
They choose a car of interest. It has;
- £1,000 profit at the full list price. However the customer negotiates £400 off, leaving the dealer £600 profit.
- The dealer has an advertised APR of 12.9% which generates them £1000 income. The customer negotiates this down to 7.9% which leaves the dealer £600 profit.
Neither ‘hidden’ commission or profit is disclosed to the customer.
What’s the difference? Why is one fair and the other isn’t?
Exactly this.They choose a car of interest. It has;
- £1,000 profit at the full list price. However the customer negotiates £400 off, leaving the dealer £600 profit.
- The dealer has an advertised APR of 12.9% which generates them £1000 income. The customer negotiates this down to 7.9% which leaves the dealer £600 profit.
Neither ‘hidden’ commission or profit is disclosed to the customer.
What’s the difference? Why is one fair and the other isn’t?
Are cash buyers now going to jump on the bandwagon and complain that their poor negotiation skills didn't get them the maximum possible discount?
It's an incestuous industry - in a main dealer world, the car manufacturers typically have their own finance companies and have tightly run franchise agreements with independent retailers/dealer groups.
To the ordinary man in the street, they would perhaps associate that for example, BMW AG (the manufacturer) is the same as BMW UK (the importer), is the same as BMW Financial Services and is the same as their shiny glass palace BMW local dealer when from a legal standpoint, they are all completely separate entities, further confused by the fact that BMW AG wholly owns BMW UK & BMWFS, as well as some BMW dealerships.
The situation where the franchisee/independent retailer can artificially bump up the rate of interest charged to the buyer to earn much higher hidden commission than if BMW Financial Services made their own decision about what rate to offer the buyer is what has gained the attention of the FCA in recent years.
I don't think any buyer is overly concerned about the fact that commission changes hands between the finance company and the dealer...more that that the amount of commission paid isn't disclosed on any of the finance agreement paperwork and the dealer has been less than transparent about how it works.
Car sales tends to be a fairly rapid, high pressure sales environment where people are making impulse decisions about what is typically one of their biggest monthly expenses outside of mortgages and childcare.
It's not the same situation, but would people accept a situation where mortgage brokers artificially jack up the rates offered to customers compared to what a mortgage lender would offer and not disclose this increase & not disclosing the amount of commission being paid by the lender to the broker?
To the ordinary man in the street, they would perhaps associate that for example, BMW AG (the manufacturer) is the same as BMW UK (the importer), is the same as BMW Financial Services and is the same as their shiny glass palace BMW local dealer when from a legal standpoint, they are all completely separate entities, further confused by the fact that BMW AG wholly owns BMW UK & BMWFS, as well as some BMW dealerships.
The situation where the franchisee/independent retailer can artificially bump up the rate of interest charged to the buyer to earn much higher hidden commission than if BMW Financial Services made their own decision about what rate to offer the buyer is what has gained the attention of the FCA in recent years.
I don't think any buyer is overly concerned about the fact that commission changes hands between the finance company and the dealer...more that that the amount of commission paid isn't disclosed on any of the finance agreement paperwork and the dealer has been less than transparent about how it works.
Car sales tends to be a fairly rapid, high pressure sales environment where people are making impulse decisions about what is typically one of their biggest monthly expenses outside of mortgages and childcare.
It's not the same situation, but would people accept a situation where mortgage brokers artificially jack up the rates offered to customers compared to what a mortgage lender would offer and not disclose this increase & not disclosing the amount of commission being paid by the lender to the broker?
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