Weird Ford finance deal - why would they do this?
Discussion
My folks have just done a deal on a new Ford Fiesta at a list price of £13,865 minus their part ex of £3,300 and £250 deposit. They were perfectly able and willing to pay the balance in cash on delivery.
However, the dealer talked them through a deal whereby they pay £7,315 of the balance in cash, and take out finance with Ford Credit for £3,000 over 24 months at 4.9% APR. He then said they should pay the first monthly installment and after that phone up (or go back to him and he will sort out) a settlement figure which they pay off there and then. The reason for doing this is to avail of a £500 rebate deal from Ford Credit which he said they would take off the settlement figure.
Very little of this makes sense to me. I assume the interest is applied as a lump sum at the outset of the agreement and not calculated daily, so they will be charged 2 x £147 plus whatever credit charge there may be. That means at best my parents will be £206 better off from this deal, but have the hassle of being credit checked, needing to terminate the agreement after the first month etc.
I strongly suspect the dealer gets a nice commission from "selling" the finance.
What I do not get is why on earth Ford Credit would do this.
My mum used to work in a Ford dealership years ago. She's not stupid and asked the dealer to explain this deal three times, but ultimately, despite the fact that they could hand over a debit card there and then felt pressured to sign up for it. Ok, hassle aside this will save my parents a small amount of money, but I'm pretty certain that effective 1.5% discount could have been obtained for a cash deal (unfortunately they don't really understand the concept of cost to change and assumed part-ex = no discounts)
Is there anything I'm missing here as I don't understand why FCE would willingly lose money. They offer a £500 rebate on credit presumably because they will make more than that over the lifetime of a normal credit agreement. This dealer seems to be deliberately gaming the FCE offer to get commission and the appearance of a good deal to the naive customer.
However, the dealer talked them through a deal whereby they pay £7,315 of the balance in cash, and take out finance with Ford Credit for £3,000 over 24 months at 4.9% APR. He then said they should pay the first monthly installment and after that phone up (or go back to him and he will sort out) a settlement figure which they pay off there and then. The reason for doing this is to avail of a £500 rebate deal from Ford Credit which he said they would take off the settlement figure.
Very little of this makes sense to me. I assume the interest is applied as a lump sum at the outset of the agreement and not calculated daily, so they will be charged 2 x £147 plus whatever credit charge there may be. That means at best my parents will be £206 better off from this deal, but have the hassle of being credit checked, needing to terminate the agreement after the first month etc.
I strongly suspect the dealer gets a nice commission from "selling" the finance.
What I do not get is why on earth Ford Credit would do this.
My mum used to work in a Ford dealership years ago. She's not stupid and asked the dealer to explain this deal three times, but ultimately, despite the fact that they could hand over a debit card there and then felt pressured to sign up for it. Ok, hassle aside this will save my parents a small amount of money, but I'm pretty certain that effective 1.5% discount could have been obtained for a cash deal (unfortunately they don't really understand the concept of cost to change and assumed part-ex = no discounts)
Is there anything I'm missing here as I don't understand why FCE would willingly lose money. They offer a £500 rebate on credit presumably because they will make more than that over the lifetime of a normal credit agreement. This dealer seems to be deliberately gaming the FCE offer to get commission and the appearance of a good deal to the naive customer.
Ford credit would be most upset if they found out this guy was instructing people to settle early. They are clearly trying to incentives people to use their funding and assume most people wont go through the hassle of arranging the agreement and settling a month later.
The sales person will be on a %/total number of cars financed type deal with either his employer or FC.
Where did you get the £147 from? £3k at 4.9% over 2yrs is nearer £133 and they will be better off that the £206 you mention, as credit charges will be low as your early into agreement (not allowed to front load anymore, see CCA 2010) and outstanding balance will be less 2 payments. Would be worth taking a look at the agreement to make sure he's not put on any "add-ons" that cant be cancelled, CPI, GAP, RTI etc.
The sales person will be on a %/total number of cars financed type deal with either his employer or FC.
Where did you get the £147 from? £3k at 4.9% over 2yrs is nearer £133 and they will be better off that the £206 you mention, as credit charges will be low as your early into agreement (not allowed to front load anymore, see CCA 2010) and outstanding balance will be less 2 payments. Would be worth taking a look at the agreement to make sure he's not put on any "add-ons" that cant be cancelled, CPI, GAP, RTI etc.
Edited by 1 on Monday 14th March 20:31
I imagine the line of thinking is the salesman get's his bit for selling a finance package, the buyer gets a slightly better deal for choosing potentially more expensive finance, but they pay off the finance quickly so don't incur any of the costs. So it's a win-win situation, but with more paperwork and a bit more risk on your parents side.
http://www.ford.co.uk/Cars/Fiesta/Promotions
Your answer is that the dealership will be given £500 to give the customer as a deposit contribution if they use Ford Option finance.
Obviously you will have to deduct a small amount of interest and some fees from this. So you will not see the full £500 as a saving.
In addition and the reason for the carry on is the dealership will also receive a bonus for selling PCP (MFR's always give incentives for selling this type of finance).
However please note it is not FCE doing this or Ford (it will cost them money). It is the Ford dealer being greedy and trying to screw the system (on the premise of saving you money).
Dixons got into a lot of trouble for doing this a number of years ago.
Your answer is that the dealership will be given £500 to give the customer as a deposit contribution if they use Ford Option finance.
Obviously you will have to deduct a small amount of interest and some fees from this. So you will not see the full £500 as a saving.
In addition and the reason for the carry on is the dealership will also receive a bonus for selling PCP (MFR's always give incentives for selling this type of finance).
However please note it is not FCE doing this or Ford (it will cost them money). It is the Ford dealer being greedy and trying to screw the system (on the premise of saving you money).
Dixons got into a lot of trouble for doing this a number of years ago.
Edited by waterwonder on Monday 14th March 20:28
waterwonder said:
http://www.ford.co.uk/Cars/Fiesta/Promotions
Your answer is that the dealership will be given £500 to give the customer as a deposit contribution if they use Ford Option finance.
Except that is not what is happening. The £250 deposit paid + £3300 px + £3000 finance + £7,315 cash balance on delivery specified on the order form is equal to the £13,865 asking price.Your answer is that the dealership will be given £500 to give the customer as a deposit contribution if they use Ford Option finance.
The dealer states the £500 will be taken off the final settlement figure on the finance. In other words my parents won't see it until they pay off the finance. This sounds arse about face to me. If it was happening as you describe I'd be less questioning of it.
waterwonder said:
Obviously you will have to deduct a small amount of interest and some fees from this. So you will not see the full £500 as a saving.
I think they will see *significantly* less than £500 saving. Ok, they will see something, but I'll be very sure of making sure that the finance is settled at the first opportunity and that there is no room for error here.waterwonder said:
In addition and the reason for the carry on is the dealership will also receive a bonus for selling PCP (MFR's always give incentives for selling this type of finance).
So they have forwarded the paperwork they have to me which amounts to the order form and a deposit receipt, although the order form specifies FCE Bank in St. Albans as the invoicee. As of yet they've signed or seen no finance agreement. From the description this is not a PCP but a straight forward HP deal (Aquire in FCE branding) - there was no mention of MGFV etc.waterwonder said:
However please note it is not FCE doing this or Ford (it will cost them money). It is the Ford dealer being greedy and trying to screw the system (on the premise of saving you money).
I think I'll call FCE tomorrow and without naming names (if possible) confirm the validity of the deal, especially the receipt of the £500 deduction from the final settlement. Like you say I simply cannot see why FCE would knowingly provide this on the terms described by the dealer.1 said:
Where did you get the £147 from? £3k at 4.9% over 2yrs is nearer £133 and they will be better off that the £206 you mention, as credit charges will be low as your early into agreement (not allowed to front load anymore, see CCA 2010) and outstanding balance will be less 2 payments. Would be worth taking a look at the agreement to make sure he's not put on any "add-ons" that cant be cancelled, CPI, GAP, RTI etc.
Thanks, numpty maths on my part. As of yet they have signed no agreement.Aside from any of the finance stuff, the other annoying thing is that my mum wanted a car with high driver position, no lip on the boot/hatch so her shopping would slide right in, and of similar ability to load up as their current Ford Fusion (don't ask). She asked my advice and I emailed her details of the Skoda Yeti last night. Today they buy a smaller, lower and hugely 'lipped' Fiesta from the first dealer they visit. Parents!
"PCP" wouldn't necessarily be mentioned on the order form. It does seem to much of a coincidence that there is a current offer on Fiesta, for a PCP, at 4.9%, with a £500 deposit contribution. Sounds like either your parents have misunderstood or have deliberately been mislead.
If it does turn out to be a PCP, they need to consider the additional fees as there is more likely to be an arrangement and purchase fee plus the settlement charges.
If it does turn out to be a PCP, they need to consider the additional fees as there is more likely to be an arrangement and purchase fee plus the settlement charges.
Fly b
d.
He's doing it for the commission and commission alone.
A friend of mine went to buy a Brand new KA (I know).
She was paying cash and the guy said almost the same to her.
'Take this, Pay half cash, Finance the rest and it means you'll still have £5000 in your bank...If you dont like the payments then just pay it off'.
I eventually butted in with 'Listen, She just wants to pay cash and not worry about payments. Can we do that or are we going 4 miles away and buying it cash there?'
He tried to joke about it but we weren't amused. Eventually the sales manager came over and apologised for the delay and took £200 off the price for being 'Patient'.
Aye, No bother pal.
d. He's doing it for the commission and commission alone.
A friend of mine went to buy a Brand new KA (I know).
She was paying cash and the guy said almost the same to her.
'Take this, Pay half cash, Finance the rest and it means you'll still have £5000 in your bank...If you dont like the payments then just pay it off'.
I eventually butted in with 'Listen, She just wants to pay cash and not worry about payments. Can we do that or are we going 4 miles away and buying it cash there?'
He tried to joke about it but we weren't amused. Eventually the sales manager came over and apologised for the delay and took £200 off the price for being 'Patient'.
Aye, No bother pal.
1 said:
"PCP" wouldn't necessarily be mentioned on the order form. It does seem to much of a coincidence that there is a current offer on Fiesta, for a PCP, at 4.9%, with a £500 deposit contribution. Sounds like either your parents have misunderstood or have deliberately been mislead.
If it does turn out to be a PCP, they need to consider the additional fees as there is more likely to be an arrangement and purchase fee plus the settlement charges.
Agreed. All this is going to get sorted out tomorrow!If it does turn out to be a PCP, they need to consider the additional fees as there is more likely to be an arrangement and purchase fee plus the settlement charges.
He is signing them up to a Ford Options Cashplan. It's a 2 year pcp where instead of monthly payments they are all lumped in together at the start plus the interest. Definatly not Acquire because the rate on that is 7.9% and he would have no way to change it.
The hastle it would cause for yourselves really isn't worth the benefit of a couple of hundred pounds. He is doing it purely for comission and to make his targets for finance.
Ford credit would take a very dim view of this happening as would the FSA if they are not aware it is a PCP. About a month after they get the car they should get a questionaire in from Ford. Might be worth mentioning this on there.
The hastle it would cause for yourselves really isn't worth the benefit of a couple of hundred pounds. He is doing it purely for comission and to make his targets for finance.
Ford credit would take a very dim view of this happening as would the FSA if they are not aware it is a PCP. About a month after they get the car they should get a questionaire in from Ford. Might be worth mentioning this on there.
IIRC the law has changed regarding car finance and they must accept early repayment and or overpayment without the same penalties as before.
Salesmen love the commission too - the guy that sold me my Picanto got £445 from the finance alone despite a £500 deposit contribution from Kia.
If it does end up on PCP make sure you're getting the benefit from it - I had TWO Kia dealers try to sell me cars on PCP deals without the £500 contribution (so they were pocketing it as well as the commission)!!
Salesmen love the commission too - the guy that sold me my Picanto got £445 from the finance alone despite a £500 deposit contribution from Kia.
If it does end up on PCP make sure you're getting the benefit from it - I had TWO Kia dealers try to sell me cars on PCP deals without the £500 contribution (so they were pocketing it as well as the commission)!!
Edited by Kiltox on Tuesday 15th March 03:29
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