Forcing debt via PCP - refusing over 30% deposit - legit?
Discussion
Naturally wanted to put the £20k from sale of current car as deposit towards next car + another few thou to minimise the interest and interest only financial costs of a PCP. VW however will not let me do that and say max they allow is about £13k deposit on a £50k spend. They are forcing me to take on debt I don't want or need and actually said just stash the £6k spare from current car sale proceeds in a savings account! That's nuts.
The other parts of the deal are good - 5.1% and a £3k dealer contrib towards PCP and a bit of a discount on a car with a 14m lead time. BUT is refusing a deposit of more than about 30% legal and allowed? I'm considering solutions to just paying it off within a month if I can make those figures work as I don't want to sit on £10k gaining 1.5% whilst paying 5.1% plus the interest only 'head in the sand' when I could be chipping away at the capital.
Cheers
The other parts of the deal are good - 5.1% and a £3k dealer contrib towards PCP and a bit of a discount on a car with a 14m lead time. BUT is refusing a deposit of more than about 30% legal and allowed? I'm considering solutions to just paying it off within a month if I can make those figures work as I don't want to sit on £10k gaining 1.5% whilst paying 5.1% plus the interest only 'head in the sand' when I could be chipping away at the capital.
Cheers
I took my £3K off with Audi finance then paid it off a few days later.
The Audi finance doc says the below.
7. Early Repayment
7.1 You have a right at any time to make early repayment. To do so, you should give us notice, and pay us some or all of the sums payable by you before you are obliged to do so under the terms of this Agreement . The payment should be made before the end of the period of 28 days, beginning with the day following the day that we receive your notice, or on or before any later date specified in your notice.
7.2 Any such repayment will be applied first to discharge sums which have already fallen due under this Agreement . The balance will then be applied to discharge your indebtedness under this Agreement by the amount paid and any applicable statutory rebate . If the effect of the early repayment is to discharge only part of your indebtedness, we will, at our discretion (subject to any agreement between you and us) elect to apply that sum to reduce either the amount of each future monthly payment, or the number of such payments to be made by you in successive months, and we will notify you of our decision.
7.3 If you discharge all your indebtedness under this Agreement , and pay the Option to Purchase Fee (if any), you may at the same time give notice that you are exercising your option to purchase the Vehicle .
The Audi finance doc says the below.
7. Early Repayment
7.1 You have a right at any time to make early repayment. To do so, you should give us notice, and pay us some or all of the sums payable by you before you are obliged to do so under the terms of this Agreement . The payment should be made before the end of the period of 28 days, beginning with the day following the day that we receive your notice, or on or before any later date specified in your notice.
7.2 Any such repayment will be applied first to discharge sums which have already fallen due under this Agreement . The balance will then be applied to discharge your indebtedness under this Agreement by the amount paid and any applicable statutory rebate . If the effect of the early repayment is to discharge only part of your indebtedness, we will, at our discretion (subject to any agreement between you and us) elect to apply that sum to reduce either the amount of each future monthly payment, or the number of such payments to be made by you in successive months, and we will notify you of our decision.
7.3 If you discharge all your indebtedness under this Agreement , and pay the Option to Purchase Fee (if any), you may at the same time give notice that you are exercising your option to purchase the Vehicle .
Ken Figenus said:
VW however will not let me do that and say max they allow is about £13k deposit on a £50k spend. They are forcing me to take on debt I don't want or need and actually said just stash the £6k spare from current car sale proceeds in a savings account! That's nuts.
Cheers
thats quite some serious financial advice. I would have thought that sort of opinion is highly regulated and that the salesperson fronting it is out of his/hers depth.Cheers
But you dont have to take the finance - there are other options
and always remember the cheapest money is your own money
Edited by Ziplobb on Friday 30th September 20:26
Edited by Ziplobb on Friday 30th September 20:26
highpeakrider said:
i’m not sure what people are thinking here, you can get a far better offer taking the PCP when it’s offering £3k off, because if you say i’ll pay cash it becomes £3k dearer.
The trick is to make use of the early payment part of the contract and immediately pay the PCP off.
This is the criminal insanity of allowing car renters to sell financial products. Nowhere else in the retail sector would a debt vendor be allowed to manipulate the price of the goods to punish a consumer into taking their expensive debt. The trick is to make use of the early payment part of the contract and immediately pay the PCP off.
It absolutely beggars belief that the car industry have been sanctioned to bypass this obvious defrauding of the retail consumer.
'Take my junk rate 5.1% debt or I'll make you pay me £3k more'.
It astounds me that consumers have sucked this up willingly for years so desperate are they to get the use of a particular type of object.
It's a horrific indictment of the U.K. schooling system that vast numbers of adults seemingly think a 'dealer contribution' is some kind of gift as opposed to a punishment!!!
DonkeyApple said:
highpeakrider said:
i’m not sure what people are thinking here, you can get a far better offer taking the PCP when it’s offering £3k off, because if you say i’ll pay cash it becomes £3k dearer.
The trick is to make use of the early payment part of the contract and immediately pay the PCP off.
This is the criminal insanity of allowing car renters to sell financial products. Nowhere else in the retail sector would a debt vendor be allowed to manipulate the price of the goods to punish a consumer into taking their expensive debt. The trick is to make use of the early payment part of the contract and immediately pay the PCP off.
It absolutely beggars belief that the car industry have been sanctioned to bypass this obvious defrauding of the retail consumer.
'Take my junk rate 5.1% debt or I'll make you pay me £3k more'.
It astounds me that consumers have sucked this up willingly for years so desperate are they to get the use of a particular type of object.
It's a horrific indictment of the U.K. schooling system that vast numbers of adults seemingly think a 'dealer contribution' is some kind of gift as opposed to a punishment!!!
Quite intrigued about how the car finance market is going to go in an increasing interest rate environment.
If you ‘play’ the system it works well. Got £6K off wife’s Tiguan, inc £2750 deposit contribution, then Withdrew a few days after delivery. Buying on finance also made for a very pleasant transaction rather than the usual battle when paying cash.
It can be a pain though - buying a Honda for one of my kids there was another £500 off, and a service deal, only available if taking the 0% PCP. Salesman told me Honda wanted all customers on PCP and was prepared to bribe them. Oddly no issue with fresh-out-of-uni daughter getting credit.
It can be a pain though - buying a Honda for one of my kids there was another £500 off, and a service deal, only available if taking the 0% PCP. Salesman told me Honda wanted all customers on PCP and was prepared to bribe them. Oddly no issue with fresh-out-of-uni daughter getting credit.
Sheepshanks said:
If you ‘play’ the system it works well. Got £6K off wife’s Tiguan, inc £2750 deposit contribution, then Withdrew a few days after delivery. Buying on finance also made for a very pleasant transaction rather than the usual battle when paying cash.
It can be a pain though - buying a Honda for one of my kids there was another £500 off, and a service deal, only available if taking the 0% PCP. Salesman told me Honda wanted all customers on PCP and was prepared to bribe them. Oddly no issue with fresh-out-of-uni daughter getting credit.
This is the best advice. Take the benefits of taking out there finance, let’s face it that’s what they are really selling. then fIt can be a pain though - buying a Honda for one of my kids there was another £500 off, and a service deal, only available if taking the 0% PCP. Salesman told me Honda wanted all customers on PCP and was prepared to bribe them. Oddly no issue with fresh-out-of-uni daughter getting credit.
k them off as soon as possible. Unless of course you have a higher interest debt else where. I. Which case use the money to pay that off first. LooneyTunes said:
The even more cynical view would be that car dealers exist to sell finance rather than cars… and that the DC is simply a carrot to incentivise action at a particular point in time.
Quite intrigued about how the car finance market is going to go in an increasing interest rate environment.
It has always staggered me that car shops have been granted an exception to the rules that govern all other retailers for the specific purpose of protecting the consumer from being misled, deceived and charged more. Quite intrigued about how the car finance market is going to go in an increasing interest rate environment.
It's an absolute abomination that what is typically the second largest and for many the largest, financial transaction they will ever do is so overtly manipulated against them.
Someone selling a car or the use of a car should categorically not be allowed to be involved in the funding requirement of that consumer. It is unbelievable that we have a situation where an individual or entity is legally permitted to not only set the funding rate but also the price of the goods. It's proper third world kleptocracy that has been specifically banned in all other consumer retail markets.
The debt requirement should be arranged on the open market where legitimate lenders competitively bid for the consumer's business so as to ensure the cheapest possible deal for each consumer. That consumer then goes to the car shop where that business must compete against all their competitors by offering the most competitive deal on the use of the car to that consumer.
What really irks me is that these aren't even British cars or British lenders. We're opting to rig the market to send vast sums of money overseas. It's plan stupid. One of the best things we could do in the U.K. would be to remove the lending monopoly from the manufacturers and allow genuine pricing competition of bot just the car but the debt.
Even if you don't buy or rent new you're still paying more for your used car because the used market is being manipulated upwards and artificially higher by the lender's ability to control and manipulate the price of the goods.
As you may gather, car finance is a real bugbear of mine. It's a legal fraud and market manipulation by the manufacturers at the expense of everyone.
As for how the car market is going to change in the face of rising debt costs? The lower money supply from the rise in the cost of heating alone will be what drives the strongest change I imagine. Heating gone up £100/month, drop the car cost by £100/month. I suspect that around the £500/month upwards we will see a subtle but clear reduction in the amount being allocated to cars.
In terms of consumer finance the one area where I've started wondering if it is a real systemic risk is 'nothing to pay' and 'zero' deals that are the absolute backbone of consumer spending in the U.K. What happens when retailers have to pay more than double up front to pay the consumers' financing in order to get the transaction? With rates and defaults all rising surely retailers who already have crushed their own margins out of fear of passing on inflation to their customers can't last for long funding their much larger debt and default risk on top?
One has to suspect that the likes of Mike Ashley could be finished and that if zero deals disappear then the entire landscape of the highstreet and the consumer web will change rapidly and horrendously?
In the U.K. we could happily allow the overseas dominated car selling industry to implode and some might argue (me) that it would be good for everyone's pockets if we did but a collapse in zero interest deals would cause highstreets to implode overnight.
Agree, DA. Although, the way some dealerships like to play the compliance card as a sales technique, they’d have you think that they were always trying to act in your best interests.
I’m sure you were generalising as is some domestic money in uk car finance but I’d be wary of investing too much in captive finance vehicles at present (I doubt all of those who deposit with Ford at their higher rates make the connection that they’re actually providing consumer finance, albeit with FSCS protection if they don’t exceed the limit) or in businesses where 0% or buy now pay later is a factor in a significant proportion of transactions.
BNPL providers with light underwriting are probably in for some interesting times too…
I’m sure you were generalising as is some domestic money in uk car finance but I’d be wary of investing too much in captive finance vehicles at present (I doubt all of those who deposit with Ford at their higher rates make the connection that they’re actually providing consumer finance, albeit with FSCS protection if they don’t exceed the limit) or in businesses where 0% or buy now pay later is a factor in a significant proportion of transactions.
BNPL providers with light underwriting are probably in for some interesting times too…
With a 40% deposit, surely you’re better off taking a loan from a bank for the rest? The rate is likely to be less than the one offered by the dealer…
If monthly payments are the concern, take the bank loan over a longer term and save to clear it after a few years in the same way you’d clear the balloon payment at the end of the PCP deal. If you’d just sell at the end of the PCP in the expectation you’d be ahead of the balloon, do the same by selling the car after 3 years and repaying the bank loan.
If monthly payments are the concern, take the bank loan over a longer term and save to clear it after a few years in the same way you’d clear the balloon payment at the end of the PCP deal. If you’d just sell at the end of the PCP in the expectation you’d be ahead of the balloon, do the same by selling the car after 3 years and repaying the bank loan.
Deposit × bank loan would seem the most sensible approach, with APRs still as low as around 3.6%.
Though as others have said, £25k can buy you some very interesting metal. Buy right and it might not depreciate much if at all. Almost certainly a lot less than a £50k new car.
Though as others have said, £25k can buy you some very interesting metal. Buy right and it might not depreciate much if at all. Almost certainly a lot less than a £50k new car.
Edited by Deep Thought on Saturday 1st October 17:39
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