What’s the deal with these, do you just turn up and smile whilst they check you have a job and your credit score?

If I go with finance I’ll not be able to ask for any discounts/extras?

Work out how much your bank will do a loan for, factor that into your negotiations. You want to go in knowing what it all costs you rather than some hard/fast rules.

Okay, maybe I’ll pop into my bank and see what they say.

If you definitely need to go down the borrowing route then you need to be comparing the overall cost of a finance deal versus a bank loan. Depending on your credit status, a loan from a bank will normally be cheaper. Be careful with finance deals at car garages, the rates they quote are not necessarily the true APR and can end up being significantly more once they have bamboozled you with jargon.

Ensure when you are doing the comparison that you get a complete figure from both for the overall cost of purchasing.

HSBC are currently doing 3.9% on loans if you need more than £7000 (I think it’s that much).
You’ll struggle to get finance through a car dealership for better than that.

Obviously, if you don’t need that much money, then the HSBC APR jumps up sharply.

Car salesman tend to lose interest though when they find out you have got alternative finance, so best to get the price as low as you can before you mention how you are going to pay for it.

If I go with finance I’ll not be able to ask for any discounts/extras?

I’d say exactly the opposite. I’d be expecting more discount if I was taking their finance, as they’ll make money on that.

Last car I bought, I negotiated another £500 off for taking their finance (which I then promptly cancelled 😈 )

A finance quote will look like the below, it is the two figures in bold you want to take note of, mainly the total amount repayable. For this example it is for a car costing £29,990. All of the cost of the finance deal over 36 months means this ends up costing you £34,390.

If a bank loan is less, then go for the bank loan option.

Duration

36 months

Average miles per year

10,000

Deposit

£2,990.00

Monthly payments

£379.89

Retailer cash price

£29,900.00

Acceptance fee

£125.00

Optional final payment

£18,104.10

Option to purchase fee

£60.00

Total amount payable

£34,390.25

Total amount of credit

£26,910.00

Excess mileage

6.00p per mile

APR

6.8% APR

As bank loans are often unsecured, you do own the car outright if financed that way.
With a PCP the finance company owns it until you make final payment.
Also ask to see small print about ‘return condition’ or whatever they call it at the dealership. Just looked up the VW one and it is 13 pages long and any change from essentially showroom condition will reduce GFV quite a bit if you intend to use it as a deposit on another car.

@tails, the car manufacturers typically subsidize the car finance deals so its hard for banks to match them. You do need to look at the terms as as noted above with a bank loan you own the car at the end vs with a lease deal you do not and the leases will have more “small print” terms which can catch you out.

As @ecky says the dealer makes commission on selling you the finance package so you may get a better deal that way

Depending on your credit status, a loan from a bank will normally be cheaper.

Not in my experience.

The bank loan will be unsecured so have a higher interest rate.

Car company loans are normally hire purchase, so the car is the security. Also the car company wants to sell you the car so they offer cheaper rates to encourage you to buy it. I got 6.9% on the Passat when the bank could only offer 19% or something daft.

LHS’s example looks like a lease or Personal Contract Plan which isn’t the same as a loan or hire purchase. I’d avoid those tbh.

I got 6.9% on the Passat when the bank could only offer 19% or something daft.

Depending on your credit status, a loan from a bank will normally be cheaper.

I’d say you don’t have a very good credit status then…

That was just post credit crunch mind when people didn’t want to lend. But you’re probably right 🙂

Not in my experience.

The key words, as my first post forget the I did this I did that part and make sure you can add up the costs. All options suit some people, some are better for some and some are better for others.

stumpy01 – Member
HSBC are currently doing 3.9% on loans if you need more than £7000 (I think it’s that much).
You’ll struggle to get finance through a car dealership for better than that.

Depends on what you’re buying. My new Mazda is on 0% for three years.

Although it is some time ago I spent many years selling via finance on vehicles. The only number to give you a true indication of cost is the TAP (total amount payable) but you must be comparing the same type of finance product. Nearly all lease type deals have a final payment and so much small print that it will make yours eyes bleed.
The OP is trying to compare a straight loan from the dealer against a straight loan from his bank. Usually, your own bank will not be the most competitive so do shop around all the on line lenders as well.
As indicated above, dealer finance can be a good deal if the manufacturer is subsidising the rate. A 0% dealer finance deal means that the manufacturer is in effect paying the interest for you.
This often means that the dealer is getting his full margin on the deal so he should have more room to negotiate. Sometimes they have to sell at full RRP but there is then room to pay too much for your px.
So it all depends on what you want to buy, if you want to actually buy it or rent it and checking every aspect of the deal.
I used to love it when some one came in asking how much is the monthlies on that? Once they told me how much they had a month I would adjust the deal to suit their available cash and they where happy. The fact that they had signed up to 48 payments rather than 36 was not even considered by them. It’s a tough old world out there so go in fully armed and do your research before you get anywhere near the dealer F&I sales person.

Ask your bank but also just do a google search. Walk in knowing how much you can buy finance elsewhere.

The dealer may be able to offer you discounts on the car/free insurance if you use their finance. As above often a good route to do this and then cancel immediately.

Bank loan. The car is yours to do with what you want then.

Small print and too good to be true.

When i was young and daft I bought a new car deal was too good to be true. And it was also it was mis sold. So there was a fee heated phone calls with the finance company. Until I sent a copy of the salesmans explanation of the deal he had helpfully scrawled on some paperwork. Suddenly too good to be true became true.

If you take out a bank loan and the vehicle is a write off the insurance company will only pay out the market value of the car(which will not be much) and you could be losing out considerably and you will still be paying the loan off.
However with finance you can get gap insurance and iff it gets written off you will get the full price of the vehicle right up Untill the time you pay your last payment.
I made the mistake of getting a loan for my van that got burnt out 5 years ago and I’m still paying the loan,I paid 5k for the van and 3 months after buying it it was burnt out and after much quibbling,sending multiple clippings from papers and auto trader showing the price of the van at the time I only got £2500 for it,hope this helps.

Gap insurance does not need to be bought from a car dealer. Plenty of places provide standalone gap products.

Also check your car insurance. Ours (for the aforementioned new Mazda) offers a ‘new-for-old’ until the vehicle is a year old. So if it’s nicked, or written off, we get a replacement that’s exactly the same, brand new.

Yep, as above…you don’t have to get gap insurace through a dealer or finance deal.

bensales, 0% finance. Was that on new or used? Was there a deposit required for that?

stumpy01, yes, new car. 0% over three years with 50% deposit.

http://www.mazda.co.uk/offers/mazda3/mazda3-offer-2/

Doesn’t just apply to the SE model, I bought a 2.0l Sport Nav. Great car.

They also offer 5.9% with no deposit.

They also offer 5.9% with no deposit

Which is higher than the bank loan. Easy to get distracted, innit?

I thought gap insurance only aplied to finance/hp,I was obviously wrong then,thanks for the info.

I went for a bank loan for mine, but be aware most of the low rates you see advertised tend to only apply if you have an account with the bank and pay in £500 a month or similar. Also I made sure that I took out a loan for no more than the car would depreciate to add its paid off, so should I lose my job or something I could still the car and pay off the loan.

Bank loan may allow you to pay off early with minimal penalties and overpay at any point. This means that you can take out the higher amount to get the lower rate then pay back the difference between the purchase price and the loan amount.

I only needed £6k for my last purchase but the £8k deal had a lower total payback amount as the rate was so much lower.

If you take out a bank loan and the vehicle is a write off the insurance company will only pay out the market value of the car(which will not be much) and you could be losing out considerably and you will still be paying the loan off.

While it must feel terrible for this to happen, how is it worse than saving up for the car/van /whatever, spending the savings and then this happening? Cars depreciate. I’d hope that only new cars or those bought from a dealer depreciate at a faster rate than you pay them back. I’ve always bough privately.

bensales – Member
stumpy01, yes, new car. 0% over three years with 50% deposit.

http://www.mazda.co.uk/offers/mazda3/mazda3-offer-2/

Doesn’t just apply to the SE model, I bought a 2.0l Sport Nav. Great car.

They also offer 5.9% with no deposit.

Blimey! Big deposit to save for, then!?
In my wife’s case, she traded in her old 308 as a deposit (got £4k) and was buying second hand, so no chance of a 0% deal.
I think those kind of offers only apply to new cars, where you pay a fat deposit.

Don’t wish to hijack but I have often looked at those 0% finance deals and wondered if borrowing all or part of the deposit (and therefore only paying interest on a fraction of the finance)was a good idea?

I realise depreciation comes into it on a new car but say you bought something that held its value fairly well ( VW do 0% from time to time).

shooterman – Member
Don’t wish to hijack but I have often looked at those 0% finance deals and wondered if borrowing all or part of the deposit (and therefore only paying interest on a fraction of the finance)was a good idea?

I realise depreciation comes into it on a new car but say you bought something that held its value fairly well ( VW do 0% from time to time).

Dunno. Only issue I could see is if you get the loan sorted for the deposit and then the finance company refuse you the finance deal as you already have a loan to pay off.

First car I bought I paid with a £5k loan. Lost loads of ££ when I sold it – paying interest on a depreciating asset… insanity. I’d rather have a cheaper car and pay with cash than throw money away like that again.

When people own a house which is worth less than the loan on it, we call it negative equity and the country goes into a spiral of depression!

IMO if you’re not paying in cash then try and find some kind of 0% finance deal. Or buy on a credit card and then move the balance on a 0% balance transfer if you can find one

Deposit contribution from the manufacturer on a new car is better than 0%. It is free money. I got £1500 from Ford because I bought my car on finance. Paid off the loan a year later with no penalty as it is illegal to charge early repayment fees. Loan only cost me around £100 as I borrowed the minimum amount.

IMO if you’re not paying in cash then try and find some kind of 0% finance deal. Or buy on a credit card and then move the balance on a 0% balance transfer if you can find one

This. We are being charged a 1.9% transaction fee by the dealer on the portion we are putting on credit card (also putting a large deposit down having sold the old car). Any balance not paid off when the 18 month interest free expires will be transferred to a new card for a small balance transfer fee.

This is a good deal cheaper than the APR on a VW car loan, or a bank loan.

If you want to be clever about it, you could put the monthly credit card payment in an ISA, and just pay the monthly minimum, so you then just pay off the credit card with the ISA funds when the interest free is up.

Thre must be some credit card companies offering massive credit limits!

Just a quick bit of advice. Assuming you’re going for something 2nd hand, then a bank loan will pay for the car outright…… However car finance is ultimately HP linked to that vehicle, god forbid for anything serious to go wrong, but if it did and the Garage didn’t want to play ball then you have a big legal backup to you in terms of the people who ultimately own the car, ‘the finance company’

stumpy01

Blimey! Big deposit to save for, then!?
In my wife’s case, she traded in her old 308 as a deposit (got £4k) and was buying second hand, so no chance of a 0% deal.
I think those kind of offers only apply to new cars, where you pay a fat deposit.

I’m in the lucky position to actually have the whole amount in cash to buy the car, and yes, we had saved for a while. But when I saw the 0% I figured keeping half of that cash in my account and earning me interest was a better deal.

Depreciation isn’t really a worry, as we’ll be keeping the car at least ten years like the last one.