0% finance - what makes are doing it?

worded

Considering a new car

Tiny screen smart phone

vistaphotos

Kia & Citroen to my knowledge

colm_mcm

Keep an eye on the price too, 0% is all well and good, but getting a few grand off is often just as good

bazz26

Also alot of people get distracted by the monthly repayment figure and forget about the amount they are financing.

Seen an advert today where Boland's were doing 0% finance on the Octavia vRS.

bazz26

Here it is:

http://www.carsireland.ie/detail.php?ad_id=1387039

tw0nk

0% on the Octavia looks great value

bazz26

Excludes the Citigo and base model on the rest of the Skoda range.

worded

bazz26 wrote: »

Here it is:

http://www.carsireland.ie/detail.php?ad_id=1387039

184 BHP

6 penalty points on your licence in the first 6 months guaranteed !

Lovely car

bazz26

I drive a 181bhp car and haven't gotten any points yet!

It's available on lesser models too.

worded

bazz26 wrote: »

I drive a 181bhp car and haven't gotten any points yet!

It's available on lesser models too.

You cant beat 0% finance ...

tw0nk

What's resale value like on these after 3 years?

ofcork

VW are doing 0% too at least blackwater motors in cork have it advertised in victoria cross.

bazz26

Just remember that those rates are for PCP so there is a lump sum payment at the end of the term unless you hand back the car.

tw0nk

Yeah that's why I'm wondering about resale value after 3 years, to compare against guaranteed future value

MuppetCheck

tw0nk wrote: »

What's resale value like on these after 3 years?

A decent, clean, not too leggy VRS will sell. Looking at the website the GFV is 13k. You won't find a decent 3 year old one for less than 18k, probably more.

@worded - it's not a licence loser at all. Pokey would be more appropriate.

bazz26

Well put it this way, the finance company are not going to loose out on the PCP deal by offering a lower GFV than it's actual market value.

tw0nk

Thats interesting so you would have ~5k to play with at change time in 3 years towards deposit or cash if you sold it

tw0nk

bazz26 wrote: »

Well put it this way, the finance company are not going to loose out on the PCP deal by offering a lower GFV than it's actual market value.

This is what happens with some brands, mostly audi and Skoda that I know of

Drummerboy08

VW Bank have designed their PCP product to hold roughly 15/20% equity after 3 years.

So that's Skoda and Audi too.

DivingDuck

Opel are also doing 0% if you qualify (they'll do a check), provided you can live with people asking how you managed to afford an Opel.

worded

Sunday indo had an article on most of the car companies offerings today.

tw0nk

You have a link to that article by any chance?

worded

tw0nk wrote: »

You have a link to that article by any chance?

Looked all over the sindo web site and cant find it ..

Took a photo with the paper under a light - best I can do

tw0nk

wow thanks a million for going to the trouble worded, greatly appreciated

worded

tw0nk wrote: »

wow thanks a million for going to the trouble worded, greatly appreciated

No problem ...

Marcusm

Drummerboy08 wrote: »

VW Bank have designed their PCP product to hold roughly 15/20% equity after 3 years.

So that's Skoda and Audi too.

And that allows them to market something at 0% when it effectively isn't. One for the CCPC.

Drummerboy08

Marcusm wrote: »

And that allows them to market something at 0% when it effectively isn't. One for the CCPC.

There's no interest throughout the agreement so I'm not sure how it isn't 0%?

The interest chargeable on the agreement and the equity in the car at the end of it are two very separate things.

Marcusm

Drummerboy08 wrote: »

There's no interest throughout the agreement so I'm not sure how it isn't 0%?

The interest chargeable on the agreement and the equity in the car at the end of it are two very separate things.

The consumer protection issue related to the overall cost of finance whether it's reflected as interest of in any other cost. For example, a discount available to a cash buyer but not a finance buyer should be included as a finance cost in the stated APR. Likewise, if the GFV is discounted from what they genuinely believe to be the expected future value then that must be included in the APR as not every customer will be in a position to purchase the car or roll it into a new PCP contract on termination.

The law is clear and based on an EU directive but is effectively I ensconced. The gap between GFV and likely future cash sale value cited here needs to be included in APR so that a genuine comparison can be made. It makes bank/credit union financing seem expensive when it might not be.

This rule, when properly implemented, can lead to hilarious results - for example a high fee credit card can end up showing a 100% or greater interest rate.

Drummerboy08

That's why on paper it's known as a Guaranteed MINIMUM future value.

Regardless, the gap between the GFV and the expected value is positive, not negative so it isn't a cost to the customer.

Marcusm

Drummerboy08 wrote: »

That's why on paper it's known as a Guaranteed MINIMUM future value.

Regardless, the gap between the GFV and the expected value is positive, not negative so it isn't a cost to the customer.

No but the fact that there is expected to be a gap is a material potential finance charge which should be disclosed. It's a misselling risk on behalf of the finance company but as usual it's ignored here. At some stage in the future there'll be ambulance chasers encouraging customers who left the GFV-actual value money on the table to chase for compo and the cost will be 20 times what it actually cost them. Probably people who roll into a new deal will get compensated too. It's not that different from credit card and loan PPI policies.

Drummerboy08

How is there a potential finance charge if the expected gap is positive - the GFV is lower than the full expected value of the car.

It's in the customers benefit, not the other way round. There is no potential for the customer to get stung.

Marcusm

Drummerboy08 wrote: »

How is there a potential finance charge if the expected gap is positive - the GFV is lower than the full expected value of the car.

It's in the customers benefit, not the other way round. There is no potential for the customer to get stung.

If they walk away and don't pay the final sum or don't look for the positivecdiff fence. It's problem with retailers sells by financial products. I'm don't mean to suggest any negative action by the dealer or the finance company but the "misprinted" GFV leaves open issues for mispricing

Just for interest, as a dealer employee, do you see better prices for cash than PCP?

mickdw

Marcusm wrote: »

If they walk away and don't pay the final sum or don't look for the positivecdiff fence. It's problem with retailers sells by financial products. I'm don't mean to suggest any negative action by the dealer or the finance company but the "misprinted" GFV leaves open issues for mispricing

Just for interest, as a dealer employee, do you see better prices for cash than PCP?

I agree that if there are big discounts for cash versus finance that this should be included to show true cost of finance.
Your comments in relation to gfv etc make little sense. I see what you are trying to get at - some people will hand the car back (bad option) and basically leave some money on the table but clearly for a manufacturer to offer a deal where the gfv was very close to expected value would be utter lunacy, not least because people would get stupidly low repayments for 3 years and have zero deposit built up to swap into a new car at year 3.
Therefore surely to claim that the vw 15 to 20 percent of new cost equity built up in car a year 3 is in some way anti consumer is silly.
Sure perhaps it should be compulsory that anyone signing up to a pcp is given a crash course to ensure they understand what they are doing but to suggest the figures should be altered to leave zero equity is lunacy.

Marcusm

mickdw wrote: »

I agree that if there are big discounts for cash versus finance that this should be included to show true cost of finance.
Your comments in relation to gfv etc make little sense. I see what you are trying to get at - some people will hand the car back (bad option) and basically leave some money on the table but clearly for a manufacturer to offer a deal where the gfv was very close to expected value would be utter lunacy, not least because people would get stupidly low repayments for 3 years and have zero deposit built up to swap into a new car at year 3.
Therefore surely to claim that the vw 15 to 20 percent of new cost equity built up in car a year 3 is in some way anti consumer is silly.
Sure perhaps it should be compulsory that anyone signing up to a pcp is given a crash course to ensure they understand what they are doing but to suggest the figures should be altered to leave zero equity is lunacy.

The inbuilt equity is important to ensure that the customer gets on the PCP drug and has a reason to roll it over. However, it's also a misselling cornerstone - the numbers are fiddled not for a malevolent purpose but the mere act of miscasting them or manipulating them leaves the finance company open to charges. It has a duty to be transparent and open and it is not fulfilling it.

You only have to look at the UK and PPInmisselling. The mass marketing of PPI allowed banks to upfront income and, in many cases, to have it paid to low tax environments (principally Ireland). The bank had an incentive to artificially reduce interest rates and maximise PPI revenues. In many if not most cases, the borrower paid the same overall as if PPi did not exist. The compo claims have exceeded 30bn.

bs2014

Interesting thoughts on the whole PCP saga. I quite like the Opel 50/50 deal....This kinda removes overly inflated RRPs that have 0% Apr. Plus it narrows the gap between a cash buyer and would be finance player

Drummerboy08

Whether you're buying straight or on finance I'll give you the same discount, as will any other manufacturers I've ever worked with - Skoda, VW, BMW, and Open back in the day.

mickdw

Drummerboy08 wrote: »

Whether you're buying straight or on finance I'll give you the same discount, as will any other manufacturers I've ever worked with - Skoda, VW, BMW, and Open back in the day.

I would have imagined that alot of the zero percent deals are based on paying retail price or very very close to it.

Drummerboy08

Nope, doesn't make a difference. Certainly not in my experience of it anyway.

Robertr

Marcusm wrote: »

The inbuilt equity is important to ensure that the customer gets on the PCP drug and has a reason to roll it over. However, it's also a misselling cornerstone - the numbers are fiddled not for a malevolent purpose but the mere act of miscasting them or manipulating them leaves the finance company open to charges. It has a duty to be transparent and open and it is not fulfilling it.

You only have to look at the UK and PPInmisselling. The mass marketing of PPI allowed banks to upfront income and, in many cases, to have it paid to low tax environments (principally Ireland). The bank had an incentive to artificially reduce interest rates and maximise PPI revenues. In many if not most cases, the borrower paid the same overall as if PPi did not exist. The compo claims have exceeded 30bn.

I sense a bit of back tracking here. Your original implication was that the dealer was covering the cost of providing 0% finance by creating a gap between the guaranteed and actual future value of the car. Do you agree that was incorrect?

Also, tell me what option is better? Pay 10% by financing with your bank?

Marcusm

Robertr wrote: »

I sense a bit of back tracking here. Your original implication was that the dealer was covering the cost of providing 0% finance by creating a gap between the guaranteed and actual future value of the car. Do you agree that was incorrect?

Also, tell me what option is better? Pay 10% by financing with your bank?

No backtracking here; there are 2 points.

1. If a greater discount is available to cash buyers than finance buyers the. The APR rate (whether zero or otherwise) is misstated. Drummer boy makes it clear that's not his experience.

2. If the lender expects to debate part of the payments at the end (as he expects market value to significantly exceed GMFV) then He needs to take this into account in describing the APR. if you assume he's planning to have a €10k excess to fund onto a new deposit, he collects this over the 3 years of the PCP but rebates it without interest. This alone shows that the APR is not comparable.

The purpose of the APR is to allow the average consumer to compare the costs of various forms of finance. Where they are manipulated, that comparison is impossible. Therefore the consumer can't tell whether the 10% bank financing is cheaper or more expensive!

Robertr

On the two points:

1) You don't get a better discount as a cash buyer on a new car. This is usually a feature on used car sales.

2) You seem to be missing/ignoring a significant point. It does not matter what the GFV of the car is. If you don't like the price you are being offered, you can still sell it yourself for what ever its actually worth and pay off the balance, so you get 100% of the benefit of any difference.

So, over the lifetime of the deal you are paying the actual price, the whole price and nothing but the price of the car.

There are no hidden extras and you don't loose out unless:

1) You give back the car, which no one does
2) You agree to an equity figure that is less then what the market would say.


and I don't know what you are going on about PPI for. That was something that was sold to customers without even asking them. Its not even remotely comparable.

Don't forget, there is a reason why only 1 or 2 car manufacturers are offering 0% at the moment. They are desperate to sell their cars!!! The rest couldn't be bothered as its not worth it.

Marcusm

Robertr wrote: »

On the two points:

1) You don't get a better discount as a cash buyer on a new car. This is usually a feature on used car sales.

2) You seem to be missing/ignoring a significant point. It does not matter what the GFV of the car is. If you don't like the price you are being offered, you can still sell it yourself for what ever its actually worth and pay off the balance, so you get 100% of the benefit of any difference.

So, over the lifetime of the deal you are paying the actual price, the whole price and nothing but the price of the car.

There are no hidden extras and you don't loose out unless:

1) You give back the car, which no one does
2) You agree to an equity figure that is less then what the market would say.


and I don't know what you are going on about PPI for. That was something that was sold to customers without even asking them. Its not even remotely comparable.

Don't forget, there is a reason why only 1 or 2 car manufacturers are offering 0% at the moment. They are desperate to sell their cars!!! The rest couldn't be bothered as its not worth it.

Do I take it that you don't understand the time value of money? I'm not even suggesting that these are bad deals merely that they are exposed to misselling claims.

Marcusm

Marcusm wrote: »

........... If the lender expects to debate part of the payments at the end (as he expects market value to significantly exceed GMFV) then He needs to take this into account in describing the APR. if you assume he's planning to have a €10k excess to fund onto a new deposit, he collects this over the 3 years of the PCP but rebates it without interest. This alone shows that the APR is not comparable............

This is key, both the lender and the seller expect the market value at the end of the monthly payment term to exceed the GMFV.

That accepted it does illustrate very well that the advertised APR is not comparable to other financial houses APRs.

All considered though I do like the concept of PCP with seemingly low APR, manageable deposit, manageable payments and some all going to plan a wedge of equity to put towards the next car.

For anyone with money in the bank it can be a prudent enough way of financing a new car. The VW idea of lower APRs the higher the spec level is good too.

From some online browsing it seems no Scirocco falls into the 1.9% APR category and Citroen C5s don't seem to fall into the claim that all Citroens are 0% APR on PCP, might be a glitch of course.

Zurbaran

A pretty comprehensive list of all the 161 deals.

http://www.independent.ie/life/motoring/shop-around-the-best-motoring-deals-on-offer-34246265.html

Casati

Drummerboy08 wrote: »

Nope, doesn't make a difference. Certainly not in my experience of it anyway.

Not 100% true with my experience - last year buying a Skoda I negotiated the full 'cash' discount and only afterwards discussed finance options on the discounted amount. I was looking at new cars this year and Opel had the same approach- full discount available regardless of finance or not. Funny though Ford who I think were only offering 4.9% actually were offering me an additional discount if I didn't take out finance

ixus

0% is a great deal if you have the full cash amount. Do the finance and put the financed amount plus balloon payment at the end on deposit.