Small trader kick back for arranging finance

[eltax91]

Hi folks

Soon to be in the market for a new (used) daily driver. As usual budget creep keeps setting in and so I’m now up to the limit of what I have saved over the last 6 years of running my daily.

That in itself isn’t a huge problem, but the car I’m buying has a reputation for big bills on occasion and so I’d like to keep a fighting fund.

I’m spending in the £10k-£13k max region. I would mainly look to take a small amount of finance over a very short period - ideally over the period of any ‘warranty’ that comes with the car so I can have it paid off quickly and have the spare few hundred a month (car allowance) towards any bills.

I guess what I’m trying to work out is what sort of fee is the trader getting from say £2-£5k (say over 12 months tops), from the finance company as I would at least try to get some of that off the sticker price of the car?!

[Butter Face]

Maybe 2-5% of the advance so not a fking lot.

[TXG399]

There's a good chance that the finance advance forms the vast majority of the profit they make from the deal. The used car market is extremely competitive and a lot of places are forced to sell cars at virtually break-even and then rely upon F&I to make a profit.

[93DW]

eltax91 said:

I guess what I’m trying to work out is what sort of fee is the trader getting from say £2-£5k (say over 12 months tops), from the finance company as I would at least try to get some of that off the sticker price of the car?!

I just did a quote with my prime lender and £3.5k borrowed over 24 months ( the shortest term I can do) makes me a whopping £180.27

[eltax91]

Thanks chaps! Not much of an incentive to knock money off then! Certainly less than I thought.

As traders, what happens if I finance the whole lot and then pay it off in the cooling off period? I i assume you’ll wiggle on the price a bit to shift a unit and then get kicked in the nuts when finance co want their fee back? If so there’s little incentive for you to stand over any issues other than the bare minimum bodge should the need arise? Don’t think I’ll be going there! Buying privately seems to not yield much saving these days so unless I find a forum member owned doted on example there seems little point

I’m looking particularly at early disco 4’s with the 8 speed box and sdv6.

Guess I need to either risk having no fighting fund and use an interest free cc should I have to Or take a small loan of the worst came to the worst. Again, not a huge risk as I should have built up a fund if I can negotiate a proper 6/12 month warranty into the deal.

[TXG399]

If you settle the finance early the dealer will receive a clawback and be forced repay the advance. The time period for which clawbacks apply varies between finance houses, but all that I am aware of would clawback the advance for early settlement in the first 12 months.

This is partly to disincentivise the dealer from encouraging/enabling customers to use a long-term loan for short term borrowing. At the dealerships I worked at we were under strict instructions to refuse to submit any finance application that we had strong expectations would be settled within the first 6 months. It costs everyone involved (bar the customer of course!) money.

Personally, unless you find a private seller who is massively undercutting the dealers, I would always say it makes sense to buy from a dealer. Consumer protection law has been significantly beefed up over the past few years, especially in regards to the warranty (or to be more accurate guarantee) a trade seller must include with a vehicle.

Edited by TXG399 on Friday 19th July 14:04

[CAPP0]

I bought a car earlier this year and said to the dealer openly (after we had agreed the deal value - c.£20k), I'm intending to pay cash but if there is mutual benefit in me taking finance and paying it off, I'll go for that. He said that I'd need to have the agreement open for 6 months otherwise he would lose his fee, and by the time you add up the interest I'd pay (which would have to be factored into the deal) vs what he would receive, it really wasn't worth it. Paid cash as planned.