0% finance. Where are the profit margins?

[anonymous-user]

Dumb question but how does it all work on 0%?

Does the dealership make minimum profit based on the cars depreciation?

They must make a mint somehow.

[RedWhiteMonkey]

You are still buying the car for sale price and not the production price.

[Driver101]

Usually when it's 0% finance you won't get the same level of discount other people have. What you gain on one side you lose on the other.

[Mandat]

Super_G said:

Does the dealership make minimum profit based on the cars depreciation?

What does this even mean?

[Composite Guru]

Driver101 said:

Usually when it's 0% finance you won't get the same level of discount other people have. What you gain on one side you lose on the other.

Not always true.

I've just bought a Volvo V40 R Design Pro T3 fully loaded and got £6500 of the price.
Originally I had opted for the finance that was 3.9% and then the following week before I took delivery the dealer rang and said Volvo were now doing 0% on any deposit amount.

I did use Car Wow for this discount so not sure if i would of got it walking through the door. Must of been lucky.

[Danm1les]

On the Vauxhall 0% up to 5 years HP scheme, which i think they are running again now, we could give the same level of discount with or with the finance.

It is true though that it still cost Vauxhall money and i am sure they still made a tidy profit per unit.

[Sheepshanks]

Super_G said:

Dumb question but how does it all work on 0%?

Does the dealership make minimum profit based on the cars depreciation?

They must make a mint somehow.

It's nothing to do with the dealer - the manufacturer supports the 0% deal.

I got one of my daughters a Honda and was all set to pay cash and then got offered another £500 off to take 0% PCP. It was a right pain to have to put a car that was a present on a PCP.

Salesman told us Honda (and all manufacturers) want everyone on PCPs as once people are on them they get forced to do something 3yrs later - generally they'll take another PCP, so another new car gets sold. Perpetual Car Prison.

Edited by Sheepshanks on Monday 23 July 10:05

[anonymous-user]

Mandat said:

Super_G said:

Does the dealership make minimum profit based on the cars depreciation?

What does this even mean?

I meant to say. Maximum. As the car deprecates over time but the agreement is still for the original price e.g. paying off a 50k agreement over 36 months and in month 36 obviously the car is not worth more than 50k.

[anonymous-user]

Ok it is starting to make sense. I guess to even qualify for the 0% someone would need to have an excellent credit rating.

[djc206]

Super_G said:

Ok it is starting to make sense. I guess to even qualify for the 0% someone would need to have an excellent credit rating.

Not really. It’s not like a personal loan where the lending criteria can be quite strict, car finance is not hard to obtain unless your credit rating is really bad.

[Sheepshanks]

Super_G said:

I meant to say. Maximum. As the car deprecates over time but the agreement is still for the original price e.g. paying off a 50k agreement over 36 months and in month 36 obviously the car is not worth more than 50k.

Again, it's nothing to do with the dealer.

Finance company owns the car, and they take it back at the end of the deal - unless the customer pays the final payment and keeps it.

Finance companies pay buttons for the cars. They make a load of money when they sell the car at 3yrs old.

[coljoh148]

A gift from the car finance gods to get you into a car that you otherwise wouldn't be able afford and sure to repeat the business 3 or 4 years later.

[RSTurboPaul]

AIUI the way to do it is get a lower price for the car by taking finance on it (because they expect to make the money on the finance interest), then ring up and request a quotation to settle the finance the very next day, then pay it ASAP.

[Sheepshanks]

RSTurboPaul said:

AIUI the way to do it is get a lower price for the car by taking finance on it (because they expect to make the money on the finance interest), then ring up and request a quotation to settle the finance the very next day, then pay it ASAP.

If it's 0% as per the OP then that doesn't make much sense.

Even if it isn't, weigh up the value of the safety net of the GFV. I Withdrew from a PCP (in the first 14 days you're Withdrawing, not Settling) on a VW and then two weeks later the emissions announcement came out. As it approaches 3yrs old the car is probably worth a couple of £K less than the GFV was.