FindernRam Posted March 19, 2021 Share Posted March 19, 2021 Minds out of the gutter lads: B for Bankers Someone clever tell me how this works: I'm thinking of changing my car and got to the stage where I know the purchase price and the trade in price. So we get to financing, usual options: Cash, Personal Contract deal (pay a bit now, owe a lot later),or loan. This is the strange bit: The dealer will credit me an extra grand if I take a loan out at 0%. So in essence I'm being paid to take a loan that doesn't cost me anything, and I could actually be in profit it I was to invest the cash! It must make sense to somebody but not to me. Link to comment Share on other sites More sharing options...
Tyler Durden Posted March 19, 2021 Share Posted March 19, 2021 How do you know the purchase price and trade in price unless you've got access to the Glass's Guide? If you're using Parker's or Autotrader valuations good luck you'll never get anywhere near that price for a part chop, if it's a large franchised garage and your car is undesirable to them you'll get even less. Link to comment Share on other sites More sharing options...
Grumpy Git Posted March 19, 2021 Share Posted March 19, 2021 20 minutes ago, FindernRam said: Minds out of the gutter lads: B for Bankers Someone clever tell me how this works: I'm thinking of changing my car and got to the stage where I know the purchase price and the trade in price. So we get to financing, usual options: Cash, Personal Contract deal (pay a bit now, owe a lot later),or loan. This is the strange bit: The dealer will credit me an extra grand if I take a loan out at 0%. So in essence I'm being paid to take a loan that doesn't cost me anything, and I could actually be in profit it I was to invest the cash! It must make sense to somebody but not to me. Salesman will almost certainly get a bigger commission from selling you the finance than he does on the car. It happens all the time, although just how it makes any sense on a 0% interest is anyone's guess! Link to comment Share on other sites More sharing options...
Stive Pesley Posted March 19, 2021 Share Posted March 19, 2021 21 minutes ago, FindernRam said: This is the strange bit: The dealer will credit me an extra grand if I take a loan out at 0%. So in essence I'm being paid to take a loan that doesn't cost me anything, and I could actually be in profit it I was to invest the cash! It must make sense to somebody but not to me. They are obviously on a commission somewhere in the chain. And I assume that you couldn't invest the cash - because you won't see it - it will be paid straight to the seller. But yes, 0% interest loans do seem weird. We just got a new kitchen on 0%, and the rep pushed us hard to take it, rather than just pay cash. Someone is obviously benefiting, but difficult to see where Link to comment Share on other sites More sharing options...
Tyler Durden Posted March 19, 2021 Share Posted March 19, 2021 The "credit" you are given may be the value you are overpaying on the transaction anyway so not a credit at all in reality. And not all people will qualify for a zero per cent loan if their credit rating is crap and if that happens then the dealer will offer an alternative loan agreement at a higher interest rate hoping that the person will be so hooked on buying the car as they have got that far that they will take that offer up. And the zero per cent loan might not be zero percent for ever if you read the small print and could revert to a higher rate after a period of time if the balance has not been paid off by then. Link to comment Share on other sites More sharing options...
RamNut Posted March 19, 2021 Share Posted March 19, 2021 Is it 0% or just 0% for a limited period. similarly is 0% or 0% at net present value when assessed with a discount rate of their choosing which is actually more than inflation? I’d suggest you pull a gun on him and get him to explain the small print. Link to comment Share on other sites More sharing options...
FindernRam Posted March 19, 2021 Author Share Posted March 19, 2021 1 hour ago, Stive Pesley said: And I assume that you couldn't invest the cash - because you won't see it No I meant if I was fortunate enough to be able to pay cash I could invest it, rather than spend on a car. Link to comment Share on other sites More sharing options...
FindernRam Posted March 19, 2021 Author Share Posted March 19, 2021 1 hour ago, Tyler Durden said: The "credit" you are given may be the value you are overpaying on the transaction anyway so not a credit at all in reality I assumed that like years ago, a cash deal was generally better than HP or a loan, but no. After I pushed back they said they might find another grand to sweeten the pot for cash, which then levelled the amount payable either way, but why not take the loan as it was interest free. Then it got weirder: If I take the loan guaranteed 0% I can at any time pay it off without penalty. I rang the bank and they said yes. I can only assume the bank is floating in cash and somewhere needs to get rid of it to avoid some deep dark tax. Link to comment Share on other sites More sharing options...
FindernRam Posted March 19, 2021 Author Share Posted March 19, 2021 2 hours ago, Tyler Durden said: How do you know the purchase price and trade in price unless you've got access to the Glass's Guide? If you're using Parker's or Autotrader valuations good luck you'll never get anywhere near that price for a part chop, if it's a large franchised garage and your car is undesirable to them you'll get even less. The deal is done apart from how to pay, I'm happy at that level. Like the Sheik I'm looking for the money? Link to comment Share on other sites More sharing options...
GboroRam Posted March 19, 2021 Share Posted March 19, 2021 23 minutes ago, FindernRam said: The deal is done apart from how to pay, I'm happy at that level. Like the Sheik I'm looking for the money? So should be all finished in the next 48 hours? Link to comment Share on other sites More sharing options...
BIllyD Posted March 19, 2021 Share Posted March 19, 2021 The dealer will probably need to meet targets to ensure they get such a competitive rate from the bank financing the deal. Therefore they would prefer you to finance the deal with credit, it's very unlikely the bank will be paying you money to take the loan. Link to comment Share on other sites More sharing options...
BaaLocks Posted March 19, 2021 Share Posted March 19, 2021 0% finance, but there's a £4k set up admin fee. Link to comment Share on other sites More sharing options...
Carl Sagan Posted March 19, 2021 Share Posted March 19, 2021 3 hours ago, FindernRam said: Minds out of the gutter lads: B for Bankers Someone clever tell me how this works: I'm thinking of changing my car and got to the stage where I know the purchase price and the trade in price. So we get to financing, usual options: Cash, Personal Contract deal (pay a bit now, owe a lot later),or loan. This is the strange bit: The dealer will credit me an extra grand if I take a loan out at 0%. So in essence I'm being paid to take a loan that doesn't cost me anything, and I could actually be in profit it I was to invest the cash! It must make sense to somebody but not to me. If you can borrow the money, get an extra grand, then pay the money back (and keep the extra grand) I like the sound of that - what bankers call an arbitrage position. This experimental physicist took these schemes to a whole new level and made $300k from them! https://www.thestreet.com/mishtalk/economics/man-makes-300000-racking-up-6-4-million-in-credit-card-charges Link to comment Share on other sites More sharing options...
FindernRam Posted March 19, 2021 Author Share Posted March 19, 2021 My reference to an extra grand is less than clear it appears, so to clarify using some round numbers Amount to be financed (Purchase less trade in ) : 10000 if I take the loan 11000 if I want to pay cash (later very reluctantly adjusted down to 10k!) I could have found the cash from my investment/pension pot if it had been worth it, but its obviously not so I'm taking the loan. Link to comment Share on other sites More sharing options...
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