Discussion
I was looking at a bike that I can easily afford to buy upfront, but the company selling offers 0% finance based on 12, 24 or 36 months so I'm quite tempted to use that instead. I've enquired about early repayment charges (if having this debt affects any other loans I want to get in the future, i.e. a mortgage) and have been told there are no charges - what's the catch?
I'm glad you're all coming to the same conclusion as me - I suppose the only way of judging whether it's overpriced is to see what other retailers are selling it for - which is exactly the same price...! Which would mean the retailer is giving up some of its margin to pay the finance for me to buy it from them.
The only other 'bad' scenario would be that I'm assuming I wouldn't own it until I'd paid it off, but then were the finance company (a third party) to go down the pan, I could pay off the rest of the bike to the administrator and keep the bike with no issues.
The only other 'bad' scenario would be that I'm assuming I wouldn't own it until I'd paid it off, but then were the finance company (a third party) to go down the pan, I could pay off the rest of the bike to the administrator and keep the bike with no issues.
0% finance is used as a way to get customers in, many car manufacturers offer it and it doesn't mean that that the product is overpriced to start with.
There is no catch, it is just another way for someone to finance the bike; use their money rather than yours and you can pay it off whenever you want with no charges, which is the same with any type of HP agreement.
There is no catch, it is just another way for someone to finance the bike; use their money rather than yours and you can pay it off whenever you want with no charges, which is the same with any type of HP agreement.
AyBee said:
I'm glad you're all coming to the same conclusion as me - I suppose the only way of judging whether it's overpriced is to see what other retailers are selling it for - which is exactly the same price...! Which would mean the retailer is giving up some of its margin to pay the finance for me to buy it from them.
As well as its own profits the finance company may well be paying the retailer commission for every customer he signs up. Ultimately, there is a third party involved and they will want paying, so either the seller sucks it all up and turns over boxes for low margin, or you get a higher price, or both. But if it's the best deal in town, it's the best deal.JungleJim said:
My chum, when we were younger bought a stereo or tv or something like that on interest free. There was nothing to pay until the final day of the agreement, but pay even one day late though and you had to pay punitive charges.
Yep, and how many people don't remember to pay it off in time? That I suspect is where the real profit comes from.AyBee said:
I'm glad you're all coming to the same conclusion as me - I suppose the only way of judging whether it's overpriced is to see what other retailers are selling it for - which is exactly the same price...! Which would mean the retailer is giving up some of its margin to pay the finance for me to buy it from them.
.
Same applies though. If they are giving up margin to do that then one of them will give up margin to sell it outrights..
That said, I argued with DFS or similar once that I would rather have a discount than the interest free and they were not having any of it.
LordHaveMurci said:
JungleJim said:
My chum, when we were younger bought a stereo or tv or something like that on interest free. There was nothing to pay until the final day of the agreement, but pay even one day late though and you had to pay punitive charges.
Yep, and how many people don't remember to pay it off in time? That I suspect is where the real profit comes from.Might fire off some emails to a few of them and see who wants my business
Finance is cheap right now, so bike shop might have to lose 4 or 5% on their RRP to cover finance.
They may also get a kick back which might help.
Its also a good tool for getting return customers, you should always make it as easy as possible for customers to buy.
You tell someone they have to spend £2,000 now - its a lot. You tell someone they can pay £55 a month for 3 years... and its interest free they are much more likely to go for it.
They may also get a kick back which might help.
Its also a good tool for getting return customers, you should always make it as easy as possible for customers to buy.
You tell someone they have to spend £2,000 now - its a lot. You tell someone they can pay £55 a month for 3 years... and its interest free they are much more likely to go for it.
blindswelledrat said:
That said, I argued with DFS or similar once that I would rather have a discount than the interest free and they were not having any of it.
Legally, they can't offer a discount for cash. Otherwise it's then not 'interest-free credit' and the offer becomes misleading.AyBee said:
I was looking at a bike that I can easily afford to buy upfront, but the company selling offers 0% finance based on 12, 24 or 36 months so I'm quite tempted to use that instead. I've enquired about early repayment charges (if having this debt affects any other loans I want to get in the future, i.e. a mortgage) and have been told there are no charges - what's the catch?
Nothing - lures a new customer in who wouldn't have necessarily bought the product in. Still goes in the P & L as a 100% sale - worry about the cash later. These schemes tend to work in two ways:
The retailer funds the scheme themselves and have calculated the cost of offering interest free credit into their profit margin.
Or
The finance is provided by a 3rd party, a finance company, who charge the retailer a fee for providing interest free.
Either way someone is paying, any guesses who this might be???
Sorry if that sounds cynical, if the price is right and interest free is an extra then why not take advantage?
Late payment charges etc are easily avoided by paying on direct debit, only the feckless should fall foul of these types of deal.
The retailer funds the scheme themselves and have calculated the cost of offering interest free credit into their profit margin.
Or
The finance is provided by a 3rd party, a finance company, who charge the retailer a fee for providing interest free.
Either way someone is paying, any guesses who this might be???
Sorry if that sounds cynical, if the price is right and interest free is an extra then why not take advantage?
Late payment charges etc are easily avoided by paying on direct debit, only the feckless should fall foul of these types of deal.
HTP99 said:
0% finance is used as a way to get customers in, many car manufacturers offer it and it doesn't mean that that the product is overpriced to start with.
Bought another new Honda Jazz a couple of months ago and, as well as the normal haggled discount, there was also another £500 off if we took the 0% APR PCP.The salesman said it's done because it keeps Honda in touch with the customer, but that seems an unlikely reason.
Sheepshanks said:
HTP99 said:
0% finance is used as a way to get customers in, many car manufacturers offer it and it doesn't mean that that the product is overpriced to start with.
Bought another new Honda Jazz a couple of months ago and, as well as the normal haggled discount, there was also another £500 off if we took the 0% APR PCP.The salesman said it's done because it keeps Honda in touch with the customer, but that seems an unlikely reason.
Butter Face said:
It makes it easier to sell you a car next time, you've paid your car off, you use that as a deposit into another car on 0% and off you go again!
I would have paid the car off if I just paid cash - as most Jazz buyers do, apparently.The thing I did wonder is if they're going to try an entice people on PCPs to switch to the new Jazz when it belatedly appears here next year.
Sheepshanks said:
Butter Face said:
It makes it easier to sell you a car next time, you've paid your car off, you use that as a deposit into another car on 0% and off you go again!
I would have paid the car off if I just paid cash - as most Jazz buyers do, apparently.The thing I did wonder is if they're going to try an entice people on PCPs to switch to the new Jazz when it belatedly appears here next year.
Honda and the salesman will keep in touch with you over the period of the PCP as they want you to come back in to buy another car in three years time, PCP's are usually incentivised by the manufacturer too, for that very reason.
HTP99 said:
PCP's, whether 0% or not are a good way to get customers back in at around 3 years old to buy a new car plus they provide a good source of 1 owner 3 year old cars.
Honda and the salesman will keep in touch with you over the period of the PCP as they want you to come back in to buy another car in three years time, PCP's are usually incentivised by the manufacturer too, for that very reason.
It's a 2 year deal - and I bet the average Jazz owner would take a lot of persuading to change at 2yrs. Especially on a car with a 5yr service and warranty package.Honda and the salesman will keep in touch with you over the period of the PCP as they want you to come back in to buy another car in three years time, PCP's are usually incentivised by the manufacturer too, for that very reason.
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