Buying a new car - Needing your advice: Is this legal and honourable? | Motoring discussion | Back Room Forum

Fri 17 May 2019 18:31

Buying a new car - Needing your advice: Is this legal and honourable? - monian

G'day all and your advice required.

I have just retired and about to change my car to one that that myself and Mrs Monian can drive & share to gain the max advantage of my new found freedom. I live rural wales and fancy a crossover SUV that will suit our needs admirably and after hours of research, we have finally made a provisional choice.

A;though I do not feel that I should identify the dealership nor the make of car, we duly went for a roadtest yesterday from a small rural dealership and a fair enough PX was offered on my outgoing 1 Series.

On later talking figures, it became clear that as cash buyers, we were not the first choice of customer and the saleman advised that - as the manufacturer was offering a £1000 contribution off the HP deposit on a new car and that we should initially embark upon a credit agreement to buy the car, take advatange of the £1000 and then pay off the Credit agreement within a few days of taking delivery of the new car. He said that the interest cost would be negligable and that in doing so, I could save can extra circa £950 - or thereabouts off the new price of the car. This would be with the recognised finance brokers for the manufacturer. Furthermore, he said that many of his customers had done just this.

What do you think: on first appearance, it does appear to be a good idea but we all know the maxim "if is seems to be too good a thing etc etc.

Your thoughts would be appreciated

Ian

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Fri 17 May 2019 18:38

Buying a new car - Needing your advice: Is this legal and honourable? - RT

It is both legal and honourable - I did it when I bought my last car, specifically to get the £5,000 manufacturer's contribution as well as the dealer's discount. However I used a PCP which should be cheaper to cancel than HP.

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Fri 17 May 2019 19:14

Buying a new car - Needing your advice: Is this legal and honourable? - Avant

There's no reason why you can't tell us the make and model of car that you're going for: plenty of people in a similar position read this forum.

As RT says, there's nothing wrong with your intended course of action, and others on here have done the same. Dealers are rewarded for selling PCP contracts so yours is doing nothing unusual.

Unlike with some other loans, with PCPs there isn't normally a penalty for early repayment, although there may be an admin charge. But check the terms and conditions before you sign up.

Edited by Avant on 17/05/2019 at 19:14

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Fri 17 May 2019 20:38

Buying a new car - Needing your advice: Is this legal and honourable? - SLO76

Unusual for the salesman to push it as their finance commission usually depends on you sticking with the agreement beyond the first month or two - depending on small print. It’s perfectly legal so take advantage of it but read the full thing before signing in case there’s a clause to charge a penalty for early repayment. I doubt it’ll be there but check before signing anything.

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Fri 17 May 2019 23:12

Buying a new car - Needing your advice: Is this legal and honourable? - Senexdriver

Exactly what I did, at the salesman’s suggestion, when we bought my wife’s car 2 years ago. I posted about it not long ago when a discussion about financing new purchases came up. In brief, we saved a combined dealer and manufacturer contribution of £3,400 on top of the new car discount. I too was a bit wary, but the finance company accepted my request to pay off the finance 2 days after taking delivery and that was the end of the matter. A few days later a letter arrived from the finance company confirming that they no longer had any interest in the car.

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Sat 18 May 2019 10:18

Buying a new car - Needing your advice: Is this legal and honourable? - NARU

It's a common offer with PCP finance.

I've done taken it, and paid it off with two different cars now. There's a credit charge for the few days you've had the finance, but as long as you settle it within 14 days there are no other charges - just ask to withdraw from the finance deal.

On the last car, the salesman was aware that I was likely to do it, but asked me not to tell him. Presumably so he had plausible deniablity to his bosses.

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Sat 18 May 2019 21:08

Buying a new car - Needing your advice: Is this legal and honourable? - monian

Thank you for your helpful and informative responses and I think I know where I'm going with this and I will avail myself of the offer.

I was initially reluctant to identify both the dealer and manufacturer until I was happy that it would be legiitimate to take advantage of this offer. The car is the new VW T - Cross and it is a very new car but with rave reviews across the media. The irony is that the large local VW dealer -all smoked glass and chrome - nearer to me couldn't get a car for me to see (let alone drive) whilst this small town dealer on the Wales Llyn peninsular had two in his showroom and had sold a further two in the recent past.

Back to the Plot then in that I appreciate the advice to check about any penalty clauses to cancel the credit agreement within a short time (ie within a week of getting the car) before I commit myself. Being such a new car, the trade is reluctant to discount (although the What Car 'target price' provides details of a dealer in Wakefield who would reduce by £200 or so).. This current manufacturer contribution can provide a further £1000 off the price.

I am grateful for your wisdom

Ian

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Sat 25 May 2019 09:19

Buying a new car - Needing your advice: Is this legal and honourable? - Brisel

I bought a new T-Cross First Edition on PCP, saved £1,000 and got 2 years free servicing. I cancelled the PCP agreement after 14 days and paid off the balance with a small interest charge. It is quite acceptable. The car has lived up to expectations and the excellent reviews it has had. One negative however is that VW have so failed to produce user manuals in English and after 5 weeks I am still waiting for one. VW UK can't tell me when these will be available!!

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Sun 19 May 2019 17:11

Buying a new car - Needing your advice: Is this legal and honourable? - Leif

In one of his recent columns HJ said it is immoral to take out PCP with the intention of paying it off immediately. I can see why he might think that, however we are talking about a big company here, and they are well aware that people can and will do just that, and it must be factored in to their business model. Also, the interest rates they charge are not exactly modest.

A VW salesperson said they’d match online broker prices as long as I agreed to buy a car before the end of March last year. She said the quote I had with a saving of £2,000 included £500 discount for PCP. I said I was paying cash. She told me I could take it out and cancel ASAP and keep the discount. I did just that. I didn’t feel it was immoral. Most people don’t pay cash, and pay a healthy interest rate to VW finance.

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Sun 19 May 2019 17:34

Buying a new car - Needing your advice: Is this legal and honourable? - skidpan

In one of his recent columns HJ said it is immoral to take out PCP with the intention of paying it off immediately.

So the car buyers champion is advising buyers to miss out on saving thousands.

We have bought 3 cars on PCP's and as the law allows we have paid them off within weeks.

Saved £2000 on the Leon, £2500 on the Note and £2500 on the Fabia, total £7000. Had to pay a small (approx £100) admin fee when we cancelled the Leon in 2013 but nothing since.

While ever manufacturers offer such schemes and the law allows them to be paid off immediately we will continue to use them.

It would be totally crazy not to.

Edited by Avant on 20/05/2019 at 11:57

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Sat 25 May 2019 09:42

Buying a new car - Needing your advice: Is this legal and honourable? - Brit_in_Germany

Indeed. It is not a question of morals (except perhaps it being immoral to offer a lower price if finance is agreed).

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Mon 1 Jul 2019 22:24

Buying a new car - Needing your advice: Is this legal and honourable? - Andrew Frame

Below is a correspondence from 3 years ago with HJ on the same subject. I am disappointed that his view has not changed in the interim.

Hi
I feel I need to respond to your comments under the heading "Sum times" in the 10th December edition.
You advise that the likelihood of being able to cancel the finance agreement on a new car with a deposit contribution is "possible". As someone with over 30 years experience my advice would have been "almost certainly", and to do so if it suits the customer. There may be a small penalty for settling the agreement early, but this is likely to be under £100 depending on how soon after the agreements inception that settlement took place.
I am sure that you are aware that the Consumer Credit Act allows for the customer to settle any time they wish during any "regulated" agreement.
The so called deposit allowance should be viewed as a conditional discount, and I see no reason that a cash buyer should be penalised for being such, after all the manufacturer will have budgeted for a percentage of people settling their agreement, and view those who continue as a bonus.
If GB and any other of your readers should follow your advice and not take advantage of the offer they stand to lose a substantial amount of money.
Sorry to take you to task on this, as I have followed your column for many years and have been impressed with the balanced views you generally put forward.
Regards
Andy Frame

And the response:

Sorry, I don't encourage cheating in any shape of form and in this case the cheating involves taking advantage of some very stupid rules that deprive the finance company of any benefit from itself financing the discount.

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Wed 3 Jul 2019 01:09

Buying a new car - Needing your advice: Is this legal and honourable? - Avant

With many (possibly most) other types of loan, there are penalties for early settlement to compensate the finance company for their loss of interest. This doesn't affect one's legal right to settle at any time.

I presume that this doesn't currently apply to PCPs because not many people are settling early. But if more and more people do, the finance companies will probably impose penalties. I would agree that this is a commercial rather than a moral issue.

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