Car Finance – FDA versus cash discount

[qureshia]

I am looking to buy a used car, the dealership has a number of finance initiatives,
Including £2000 (dealer deposit) and £2000 (centre deposit), the finance is at 3.5% (5.9 APR)

Now the silly question is if I was to buy for cash (not take finance) is it likely they would take £4k of the price ??

Cash price - £26,950
Centre Deposit Allowance - £2000
Finance Deposit Allowance - £2000
Customer Deposit - £3,202
Amount of credit - £19,747
GFV - £10,120
Total amount payable - £29,991

[cuprabob]

Cash is no longer king and to the dealer the worst option, so a discount is very unlikely.

They get financial incentives for selling finance, with cash all they get is the hassle of having to pay it into the bank and the risk of forged notes.

[jpringle819]

It would be worth finding out what the penalties are for paying off the finance early. That way you could accept their contributions towards the total cost and then pay off the balance with your cash.

[Elroy Blue]

qureshia said:

I am looking to buy a used car, the dealership has a number of finance initiatives,
Including £2000 (dealer deposit) and £2000 (centre deposit), the finance is at 3.5% (5.9 APR)

Now the silly question is if I was to buy for cash (not take finance) is it likely they would take £4k of the price ??

Cash price - £26,950
Centre Deposit Allowance - £2000
Finance Deposit Allowance - £2000
Customer Deposit - £3,202
Amount of credit - £19,747
GFV - £10,120
Total amount payable - £29,991

But by buying with finance you're not actually getting anything off the car are you. The total amount with finance is £3041 more than the cash price. You'd be better off getting £500 off and paying in full.

[mcflurry]

Elroy Blue said:

But by buying with finance you're not actually getting anything off the car are you. The total amount with finance is £3041 more than the cash price. You'd be better off getting £500 off and paying in full.

But could you earn £3041 using your cash during the period of the debt?

[VII]

mcflurry said:

But could you earn £3041 using your cash during the period of the debt?

Take out finance for the discount, pay off finance. Use what would have been monthly payments to invest in your portfolio, 'averaging in' thus removing big risk in simply investing a lump sum. Not to mention peace of mind from not owing a financial institution..

[qureshia]

Thanks for the replies

£4k seems a huge discount for taking out finance at a relatively modest rate

[qureshia]

Elroy Blue said:

But by buying with finance you're not actually getting anything off the car are you. The total amount with finance is £3041 more than the cash price. You'd be better off getting £500 off and paying in full.

Not correct

You pay
Dep of £3202
41 payments of £309 a month (£12,669)
Final ballon of £10,120

Total of £25,991

So paying over 3 1/2 years is £1,040 cheaper than paying upfront

Edited by qureshia on Saturday 13th July 11:46

[Kudos]

qureshia said:

Thanks for the replies

£4k seems a huge discount for taking out finance at a relatively modest rate

Check out broadspeed.com to see what discounts are available

[CYMR0]

Elroy Blue said:

But by buying with finance you're not actually getting anything off the car are you. The total amount with finance is £3041 more than the cash price. You'd be better off getting £500 off and paying in full.

The total amount payable has to include the amount paid by the dealer and the manufacturer.

To be honest there's no way of knowing which is better without shopping around. Sometimes the finance deposit allowance is funded out of the margin in the car; sometimes it is on top of it.

The Consumer Credit Act limits the charges for repaying early however, so these shouldn't be too onerous.

[walm]

CYMR0 said:

The total amount payable has to include the amount paid by the dealer and the manufacturer.

How so?
The OP has shown the working on what he has to pay - and it appears correct to me.
What the dealer "pays" is irrelevant.
It is what the buyer actually has to write a cheque for that matters, isn't it?

If you have £25k knocking about isn't is always best to take whatever the best finance deal is and then pay it off asap in cash? Therefore securing the greatest up front discount while not having to pay for it with the interest... no?