Drivers Face Negative Equity

[Dieselman]

No such thing as 0% apr they simply add the interest charge onto the purchase price

Somone will say they don't charge more for 0% finance and would be technically correct, but what they do is forgo any discount, which can be thousands of pounds.
It's similar to the dealer contribution for PCP only deals, a cash buyer would get a discount of the same or more.

 

[IanA2]

I suppose the one disadvantage that hasn't been brought up is the condition of the car upon return....If margins are squeezed so tight that the pips are squeeking then they will go over the car with a very fine toothcomb....or they may....

Just a thought there from left wing....

They tried that on me.....sent them away with a flea in their ear!

 

[crockers]

They tried that on me.....sent them away with a flea in their ear!

Good on you ...what did they claim needed doing?

 

[maddog]

Somone will say they don't charge more for 0% finance and would be technically correct, but what they do is forgo any discount, which can be thousands of pounds.
It's similar to the dealer contribution for PCP only deals, a cash buyer would get a discount of the same or more.

Yep thats right, there is no such thing as a free lunch

 

[del320]

I suppose the one disadvantage that hasn't been brought up is the condition of the car upon return....If margins are squeezed so tight that the pips are squeeking then they will go over the car with a very fine toothcomb....or they may....

Just a thought there from left wing....

#161 - 4th para - keep up

 

[hawk20]

Somone will say they don't charge more for 0% finance and would be technically correct, but what they do is forgo any discount, which can be thousands of pounds.
It's similar to the dealer contribution for PCP only deals, a cash buyer would get a discount of the same or more.

There is a court ruling that you cannot offer 0% interest and give discounts for cash. Court ruled it would not then be 0%. Don't know if anyone has tried to enforce with cars.

Dealer contribution for PCP deals comes from MB (if they are MB offers as on the website). You can then get some more discount from the dealer. Then you will find to some people's surprise that you get more discount if you do a PCP than you get when paying cash. (Because they don't get the MB Finance contribution on cash deals) Happened to me twice and my son in law. All Mercedes cars. As Rory has often said, from time to time they throw big subsidies at PCP deals usually to shift some excess capacity. They prefer it to cutting prices more generally.

 

[hawk20]

No such thing as 0% apr they simply add the interest charge onto the purchase price

Business users are different as there are tax advantages there

Fact is its not easy to get a guaranteed return

Not allowed to do that.
You may get less discount. But sometimes you may get more.
See other posting.
And BTW it is fairly easy to get a guaranteed return. Try NS and I
Try most banks and Building Socities who usually have savings accounts or bonds guaranteed for a year or sometimes two years.
There are also govt bonds which give a guaranteed yield to maturity.

 

[hawk20]

Worth remembering that they all have huge marketing budgets and sit down from time to time and ponder how to shift some more metal -especially if sales have turned down below expectations, or near the end of a model run etc.

'Shall we do loads of adverts (like VW recently and Seat) or shall we offer some tasty finance deals to shift the surplus? Better than cutting price across the board' they think.

As customers, we can keep an eye out for bargains and do the sums to see if they have any benefits for us.

 

[crockers]

Not allowed to do that.
You may get less discount. But sometimes you may get more.
See other posting.
And BTW it is fairly easy to get a guaranteed return. Try NS and I
Try most banks and Building Socities who usually have savings accounts or bonds guaranteed for a year or sometimes two years.
There are also govt bonds which give a guaranteed yield to maturity.

Careful with that one -- only guaranteed to get your initial investment back if bought at inception --- not may members of public get access to Govt Bonds at inception - usually bought in bulk by insurance / pension funds etc..

 

[hawk20]

Careful with that one -- only guaranteed to get your initial investment back if bought at inception --- not may members of public get access to Govt Bonds at inception - usually bought in bulk by insurance / pension funds etc..

I think we are a bit in the fine print here. I think you'd agree they have a guaranteed yield to maturity whenever you buy them. The interest p.a. is given and the maturity date and value.

 

[maddog]

Not allowed to do that.
You may get less discount. But sometimes you may get more.
See other posting.
And BTW it is fairly easy to get a guaranteed return. Try NS and I
Try most banks and Building Socities who usually have savings accounts or bonds guaranteed for a year or sometimes two years.
There are also govt bonds which give a guaranteed yield to maturity.

Doesnt matter they still do it , although usually its a ploy used to shift lots of cars when they have stock piled up

Bought a Freelander on 0% for exactly this reason, dealer offered a 0% price which came down when i said i would pay cash a leave a deposit there and then. I then tried to negiotiate the finance price down to this and failed until we compromised on paint colours , they had lots of turquiose ones they needed to shift and everyone wanted green.

Price remained the same on paper the discount was added to the px they offerred me probably to get around the law

A guaranteed 7% after tax show me one building society thats offerring that??

Either way i dont buy it and you wont convince me that MB subsidise their PCP buyers.

 

[hawk20]

Fact is its not easy to get a guaranteed return

This is what you said Maddog. I just aimed you at some guaranteed returns. Try Nationwide too.

 

[crockers]

I think we are a bit in the fine print here. I think you'd agree they have a guaranteed yield to maturity whenever you buy them. The interest p.a. is given and the maturity date and value.

No we are not.............

The maturity is £100 the current price may well be higher so therefore there is a guaranteed LOSS if held to redemption. The Yield printed is based on the inception price not the current price. Yes you will get the yield to redemption but if you are paying more than the redemption for the bond you are using capital to subsidise your yield...

 

[hawk20]

No we are not.............

The maturity is £100 the current price may well be higher so therefore there is a guaranteed LOSS if held to redemption. The Yield printed is based on the inception price not the current price. Yes you will get the yield to redemption but if you are paying more than the redemption for the bond you are using capital to subsidise your yield...

Of course, I agree. But it is a simple matter to calculate the yield to redemption that you will actually get allowing for interest and the positive or negative change in capital value. The overall yield you get is known and easy to calculate and guaranteed by the govt in the case of govt bonds.

 

[Biscuit]

Try Nationwide too.

Hawk,

I'm in the market for a bit of long saving - nationwide is offering 4% gross or thereabouts.

www.nationwide.co.uk/savings/all-accounts/all-accounts.htm

am i missing something?

sorry link doesn't seem to work click savings and you'll get it. Apologies

 

[crockers]

Of course, I agree. But it is a simple matter to calculate the yield to redemption that you will actually get allowing for interest and the positive or negative change in capital value. The overall yield you get is known and easy to calculate and guaranteed by the govt in the case of govt bonds.

Then we have different ideas of simple ....

Having had to do this I use the following formulae

http://www.dmo.gov.uk/documentview....rket/formulae/yldeqns.pdf&page=Gilts/Formulae

It is far from simple as you have to allow for an ongoing discount of the price as you get towards redemption...

 

[scumbag]

I have just stumbled accross this particular peice of advice.


4.21 For example, the rate of interest charged under a credit agreement, or
the rate or amount of other fees or charges, may be so much higher than
those applicable generally in the particular market sector, or payable by
borrowers in similar situations, as to make the relationship as a whole
unfair to the borrower. They may also, in the particular circumstances,
be oppressive or exploitive of the individual borrower even if they are in
line with rates prevailing at the time in the particular sector.


It should not be too difficult to make the assertion that gaining an MB contribution, for PCP only is therefore not only unfair to those wishing to buy outright using a loan, but also to those wishing to buy outright with cash.


The term, MB contribution would come under the term Charges in the above statement, as to take out a HP/LOAN or other form of finance, not including PCP means that the borrower would be required to take a form of credit he would not naturally have choosen, with which to buy his car outright, but is also unable to take fair advantage of an available discount for the same product as any other borrower.

The same applies to cash purchasing.

You can therefore expect to receive the discount, no matter which way you decide to purchase your car.


To get this point across to a dealer, you simply need to show the full paid price for the car, when bought outright, at the end of any term. If the discounts relate to the credit proving to be cheaper than a cash purchase, in amount paid for ownership, then the dicsount that applies would be enough to bring the price together or it becomes unfair.

Same also applies to any hire purchase agreement.

office of fair trading writes these rules. I am sure there are more, but the basis is that its unfair to practice to encourage the consumer to take out a form of credit they would not normally have choosen.

 

[hawk20]

I have just stumbled accross this particular peice of advice.


4.21 For example, the rate of interest charged under a credit agreement, or
the rate or amount of other fees or charges, may be so much higher than
those applicable generally in the particular market sector, or payable by
borrowers in similar situations, as to make the relationship as a whole
unfair to the borrower. They may also, in the particular circumstances,
be oppressive or exploitive of the individual borrower even if they are in
line with rates prevailing at the time in the particular sector.


It should not be too difficult to make the assertion that gaining an MB contribution, for PCP only is therefore not only unfair to those wishing to buy outright using a loan, but also to those wishing to buy outright with cash.


The term, MB contribution would come under the term Charges in the above statement, as to take out a HP/LOAN or other form of finance, not including PCP means that the borrower would be required to take a form of credit he would not naturally have choosen, with which to buy his car outright, but is also unable to take fair advantage of an available discount for the same product as any other borrower.

The same applies to cash purchasing.

You can therefore expect to receive the discount, no matter which way you decide to purchase your car.


To get this point across to a dealer, you simply need to show the full paid price for the car, when bought outright, at the end of any term. If the discounts relate to the credit proving to be cheaper than a cash purchase, in amount paid for ownership, then the dicsount that applies would be enough to bring the price together or it becomes unfair.

Same also applies to any hire purchase agreement.

office of fair trading writes these rules. I am sure there are more, but the basis is that its unfair to practice to encourage the consumer to take out a form of credit they would not normally have choosen.

You can't just make up law over breakfast and state it as though it is fact.

First -in law- and in common sense- a discount is not a fee or a charge. It is a discount. Meaning you pay less. Not more, which is what a fee or a charge implies.

And nobody forces anybody to take out a PCP. It is a voluntary agreement entered into by willing partners, controlled by law.

Your argument is like saying pretty women should be illegal because they force men to enter into relationships 'they would not normally have chosen'.

The advice you quote is, however, a useful warning to all to check the APR on all finance deals. Just ask: what is the APR. Some, as your quote says, charge excessive APR's. Store cards and many shop finance deals charge 29.9% APR.

But the MB deals I drew to members attention were all around a very competitve rate of 5% to 6%.. Good value when coupled to a good discount and a generous GFV.

 

[Rory]

office of fair trading writes these rules. I am sure there are more, but the basis is that its unfair to practice to encourage the consumer to take out a form of credit they would not normally have choosen.

You've got the whole thrust of those rules the wrong way around - the idea is to prevent prevent people who need to buy things on credit paying more (as a basic price, not including interest etc) than people who pay cash.

So retailers cannot give discounts for cash that are not available to credit buyers. In practice in the car retail market, the opposite happens.

 

[scumbag]

I was not making the law up over breakfast.

I was merely pointing out that you could have used that to your advantage by having suggesting it to a dealer.

Of course, you can always blame me for writing the law, however, you could quite easily have used it the way I said and see what they do.

I understand its for credit and the credit consumers act and all that. However, if you feel that its fair to offer discounts only to those who take out PCP's help yourself.

I don't and I would use anything to convince the dealer that I should be treat as fairly as someone taking out credit.

But if you want to pay more, thats fine. I don't mind.


There is also the advantage that you can take the credit out, get all the discounts, then pay off the outstanding balance withint the first 30days. Contract hire have early payment redemption fees, but I don't recall seeing one on a PCP.