0% Finance deals - are they real / genuine?

Bob_Marley

A few friends of mine over the years have gone for various zero percent car finance deals on new cars.

They claim that when they offered to buy straight without finance, they were not offered a better price, so they went for the zero % finance.

I don't doubt they were told that by some dealers to get a sale, and I know dealers also get some commission on finance, but are these zero % finance deals genuine ?

I find it hard to believe a cash straight sale, would not get you discount compared to a "0%" finance price ? and if it does, then it's not truthfully zero percent finance.

Calahonda52

from
https://en.wikipedia.org/wiki/0%25_finance
such schemes serve the purpose of attracting and exploiting vulnerable customers.

colm_mcm

Calahonda52 wrote: »

such schemes serve the purpose of attracting and exploiting vulnerable customers.

Yeah, they’re such a rip off. All that interest you don’t pay really adds up.

dar83

And the fact you can pay the same amount as you would for a straight deal, but over three years and also keep your options open on an available escape route is a complete scam. :P


As with anything "finance" related, if you go in with your eyes open and pay attention to the details, there can be no surprises and it works out for everyone.

Heres Johnny

They're not a scam but they must, by the laws of time value of money, dictate that the price of the car is inflated against a car paid for up front to take this into account.

If a car is 20k and it's paid up front, the manufacturer can either:

Invest the money
Pay off debt
Lend the money

All of which generate a return on the money

If the car is 20k and is paid monthly at say 400 a month, the above options are not available to anywhere near the same extent.

So, to generate a return, the manufacturer sets price higher and customer thinks it's a great deal at 0%.

Not to mention inflation yada yada yada.....

As regards dealers wanting exact same price for cash sale and 0% finance, I.e. no discount, well they have to do this really don't they because if they don't then 0% finance ceases to exist.

I could walk in and get a 2k discount on the car for cash then turn around next day and say actually I'll take the 0% finance instead of paying up front thank you very much.

In all walks of life, in every product, no matter how and when you pay for something, you are paying for that product/service in full.

Don't confuse cash flow with actual cost.

Another thing about 0% finance is it's often used to move undesirable stock that would either stay sitting in forecourt or would have to be heavily discounted to move it.

Scam no, tool of the trade to generate sales, yes.

Beneficial to the buyer? Maybe.

godtabh

Heres Johnny wrote: »

I could walk in and get a 2k discount on the car for cash then turn around next day and say actually I'll take the 0% finance instead of paying up front thank you very much.

Are you saying you could walk in agree the €2k discount and come back the next day and get that plus the 0%? I doubt it

mloc123

godtabh wrote: »

Are you saying you could walk in agree the €2k discount and come back the next day and get that plus the 0%? I doubt it

My experience... I negotiated a price/trade in etc.. and had that finalised before ver mentioning how I planned to fund it.

MarkN

mloc123 wrote: »

My experience... I negotiated a price/trade in etc.. and had that finalised before ver mentioning how I planned to fund it.

Exactly. How you finance is no major big deal to the garage, you do the deal first. What you seem to be confused with OP is having a trade in versus not.

Dealers also generally get some incentive to sell finance.

NIMAN

Had this debate with a car salesman once, when I asked about a cash sale.

He said it didn't matter to him how someone paid for their car. In fact he said all salesmen would prefer every car to be taken on finance, as they get extra commission for it.

Cash used to be king, not any more I think.

Lantus

A typical 30k new car at even 6pc interest could easily accrue 4k interest or more. It's unlikely you will get that level of discount off a dealer.

DaveyDave

godtabh wrote: »

Are you saying you could walk in agree the €2k discount and come back the next day and get that plus the 0%? I doubt it

I don't see why not. People say the 0% interest is made up in the price of the car but the fact is the price is the same for everyone. Whether or not you get more of a discount for paying cash though I can't say, I haven't seen anyone mentioning this on here.

Bob_Marley

mloc123 wrote: »

My experience... I negotiated a price/trade in etc.. and had that finalised before ver mentioning how I planned to fund it.

That's what you would think, and I'm sure it sometimes happens, but as I said that's not what happened in my friends case though or they would have bought with cash and not bothered with the finance.

Bob_Marley

Heres Johnny wrote: »

As regards dealers wanting exact same price for cash sale and 0% finance, I.e. no discount, well they have to do this really don't they because if they don't then 0% finance ceases to exist.

I could walk in and get a 2k discount on the car for cash then turn around next day and say actually I'll take the 0% finance instead of paying up front thank you very much.

That's what seems to have happened recent buyers I was talking to, the dealers refused to give them any better price by buying straight with cash, so then they went with the 0%.

Sounds to me that if a manufacture in a particular sales period is doing 0% finance , and refusing discounts for no finance buyers, then the non finance buyer looking for the best value for money, should steer clear of that marque during any 0% finance offers, and buy off another manufacture, as the price of the car has been artificially increased for all buyers to cover the 0% offer.

colm_mcm

Why would they give you a discount for not doing finance though?

Bob_Marley

colm_mcm wrote: »

Why would they give you a discount for not doing finance though?

because you're not paying for finance, and they get the money up front, instead of having to wait a considerable period to pay off the cost price to them and their balance sheet.

scooby77

Before buying current 152 leon st did lots research, and visited at least 2 each of vw, seat, skoda and audi garages to compare prices of equivalent mqb cars (golf, leon etc ) hadn't really intended doing PCP, had cash to buy. In every case cash price was no lower, in a few cases was able to strike better deal by negotiation on PCP terms.
In the end went with Seat 0% PCP. No catches, I keep a lot of my savings, pay of small amount each month, then pay off balance . (It wasn't a factor though in deciding which car-I preferred leon drivability over golf and octave, and the A3 with equivalent spec was over priced, and audi offers on the Audi I was trading in were the lowest-some might say insulting! And yes I know depreciation probably highest on Leon, but I like it!)
It was a no brainer for me, with the caveat that I have the cash to pay gmfv and intend to keep the car longer than 3 years!

colm_mcm

Bob_Marley wrote: »

because you're not paying for finance, and they get the money up front, instead of having to wait a considerable period to pay off the cost price to them and their balance sheet.

They wouldn’t have to wait either way.

Bob_Marley

colm_mcm wrote: »

They wouldn’t have to wait either way.

Well someone's waiting for the money and has to pay for the credit. Money isn't debited for free.

Bob_Marley

scooby77 wrote: »

Before buying current 152 leon st did lots research, and visited at least 2 each of vw, seat, skoda and audi garages to compare prices of equivalent mqb cars (golf, leon etc ) hadn't really intended doing PCP, had cash to buy. In every case cash price was no lower, in a few cases was able to strike better deal by negotiation on PCP terms.
In the end went with Seat 0% PCP. No catches, I keep a lot of my savings, pay of small amount each month, then pay off balance

Finance is not free, it's added onto the price of the car. Seems straight non finance buyers are in reality being doubly stung now.

colm_mcm

Not really, you just don’t understand what you’re posting about.

Not trying to be mean or anything so please don’t be offended by that.

MarkN

Bob_Marley wrote: »

Finance is not free, it's added onto the price of the car. Seems straight non finance buyers are in reality being doubly stung now.

0% is to drive sales and market share.

Bob_Marley

colm_mcm wrote: »

Not really, you just don’t understand what you’re posting about.

Not trying to be mean or anything so please don’t be offended by that.

I don't think you understand basic finance, borrowing money comes at a price, but that's not the issue, changing people who don't avail of the finance for it anyway is.

Squeaksoutloud

Bob_Marley wrote: »

Finance is not free, it's added onto the price of the car. Seems straight non finance buyers are in reality being doubly stung now.

Bob did you not get your answer to that question of the ask the salesman thread! I just ordered a car on 0.9% finance and shopped around too. Made no difference to price of car. How many times do you need to hear it!

Bob_Marley

MarkN wrote: »

0% is to drive sales and market share.

We know that, but why does the preclude giving those who don't avail of financing and its associted costs a better price ?

colm_mcm

Bob_Marley wrote: »

I don't think you understand basic finance, borrowing money comes at a price, but that's not the issue, changing people who don't avail of the finance for it anyway is.

What does that last bit mean?

Bob_Marley wrote: »

We know that, but why does the preclude giving those who don't avail of financing and its associted costs a better price ?

There’s no reason for them to give a better price, they’re still buying the car from the distributor, and whether VW Bank, Bank of Ireland, Garda Credit Union, or your own Bank draft/EFT pays for the car, they still get paid.
Do you think that people getting finance should be charged extra or something? That wouldn’t be fair would it?

MarkN

Bob_Marley wrote: »

We know that, but why does the preclude giving those who don't avail of financing and its associted costs a better price ?

Apart from your two friends (of which you’ve given very little details) I haven’t seen cases where what you’re saying happens. Can you give specifics or a bit more info?

Lantus

The manufacturer has one published price list. They don't jury rig the prices for zero interest models as you'd notice a car going up or down in price by 3 to 5k for a typical family car to offset any loss in income.

In many cases an external bank is the lender. If they negotiate low interest and hike their prices to gauge it destroys competitive advantage. The dealer doesn't get the interest, the lender does.

In other cases vw are the bank and simply have the power to provide zero interest loans. But they don't do it on all cars all the time. It changes subject to demand and model newness. Try getting a karoq on zero interest!

It drives new sales and as PCP seems to count for 70 to 90% of all new sales provides a steady income to all.

It also helps ensure another car sale after 3 years. The long game plays well at lower rates. The industry knows that.

btkm8unsl0w5r4

You paying one way or the other, there is no free lunch. The lender is paid the interest by the manufacturer.dealer and they discount the car to you accordingly. A cash buyer can negotiate the discount and save that money.

coolbeans

Bob_Marley wrote: »

colm_mcm wrote: »

Why would they give you a discount for not doing finance though?

because you're not paying for finance, and they get the money up front, instead of having to wait a considerable period to pay off the cost price to them and their balance sheet.

I've noticed, and to be fair, I don't really know as I'm not in the trade, but from my own observerations that cash up front on a car deal isn't half as attractive to dealers as the average punter thinks it is. At least for main dealers on new cars.

jimmycrackcorm

Bob_Marley wrote:

They claim that when they offered to buy straight without finance, they were not offered a better price, so they went for the zero % finance.

The reason is that it would be illegal to allow for a discount in lieu of the zero percent interest deal.

Otherwise the dealer has been deliberately misleading purchasers into going for zero percent finance when a lower cash price implies that you are actually paying interest on the "zero" percent finance.

JJJJNR

Zero percent finance is a marketing ploy to make people take out loans, as the more loans that are taken out the better for the bank, as they can sell the loan on to some other bank and create another loan. So more and more loans are generated and then eventually the price of things gets more expensive for no reason other than over supply of money.

They are just trying to dress up the worst financial mistake of your life which is buying a new car.

colm_mcm

If it’s PCP as well, there’s always the chance you’ll hand the car back at the end, which is often good for the dealer.

Bob_Marley

MarkN wrote: »

Apart from your two friends (of which you’ve given very little details) I haven’t seen cases where what you’re saying happens.

Did you not see Scooby's post ?

scooby77 wrote: »

Before buying current 152 leon st did lots research, and visited at least 2 each of vw, seat, skoda and audi garages to compare prices of equivalent mqb cars (golf, leon etc ) hadn't really intended doing PCP, had cash to buy. In every case cash price was no lower, in a few cases was able to strike better deal by negotiation on PCP terms.
In the end went with Seat 0% PCP. No catches, I keep a lot of my savings, pay of small amount each month, then pay off balance . (It wasn't a factor though in deciding which car-I preferred leon drivability over golf and octave, and the A3 with equivalent spec was over priced, and audi offers on the Audi I was trading in were the lowest-some might say insulting! And yes I know depreciation probably highest on Leon, but I like it!)
It was a no brainer for me, with the caveat that I have the cash to pay gmfv and intend to keep the car longer than 3 years!

Bob_Marley

jimmycrackcorm wrote: »

The reason is that it would be illegal to allow for a discount in lieu of the zero percent interest deal.

Otherwise the dealer has been deliberately misleading purchasers into going for zero percent finance when a lower cash price implies that you are actually paying interest on the "zero" percent finance.

Can you quote what legislation prevents this then ? Because if that is the case, that would mean that what happened below was actually illegal ?

godtabh wrote: »

Are you saying you could walk in agree the €2k discount and come back the next day and get that plus the 0%? I doubt it

mloc123 wrote: »

My experience... I negotiated a price/trade in etc.. and had that finalised before ver mentioning how I planned to fund it.

Bob_Marley

If a builder said you can buy one of their houses for so called " 0% interest " over the lifetime of the mortgage, but if you try to buy it now without a mortgage we're going to charge you the exact same as the total mortgage price anyways, alarm bells would be ringing, or at least they would be with me anyways.

ted1

colm_mcm wrote: »

Calahonda52 wrote: »

such schemes serve the purpose of attracting and exploiting vulnerable customers.

Yeah, they’re such a rip off. All that interest you don’t pay really adds up.

Car companies want x for selling a car

They either sell it for y at z% intertest ti get x

Or sell it for X-rays zero percent

Either way they get the original price , 0% just means the won’t offer the discount you get at 5%

unkel

colm_mcm wrote: »

Yeah, they’re such a rip off. All that interest you don’t pay really adds up.

You may pay zero interest, but you're overpaying for the car in the first place. It is very basic economics really. Heres Johnny explains it pretty well just 2 posts down from yours.

How so many seemingly intelligent people in this country don't seem to understand this is beyond me if I'm honest.

colm_mcm

unkel wrote: »

You may pay zero interest, but you're overpaying for the car in the first place. It is very basic economics really. Heres Johnny explains it pretty well just 2 posts down from yours.

How so many seemingly intelligent people in this country don't seem to understand this is beyond me if I'm honest.

You’re going on the assumption that the zero percent finance price is different to the ‘cash price’? Or just that either price is inflated anyway so you’re overpaying even if the dealer sells out at cost?

I understand how economics work, don’t worry.

unkel

colm_mcm wrote: »

You’re going on the assumption that the zero percent finance price is different to the ‘cash price’? Or just that either price is inflated anyway so you’re overpaying even if the dealer sells out at cost?

At zero percent finance, there isn't extra margin from the finance company in it for the dealer, so there is less room for negotiation. And yes, of course the list price is only a list price in either case. The target is as far below it as you can go

Now these are basic economics, applicable to most cases, but there could be all sorts of other stuff at play like the incentives between the importer and the dealer etc. or Tesla where there are no discounts at all

And apologies if my last post came over as arrogant, didn't mean it like that

JJJJNR

JJJJNR wrote: »

................

They are just trying to dress up the worst financial mistake of your life which is buying a new car.

If you get through life with buying a new car being your worst financial mistake you're doing ok IMO.

€30k car new, lose 60% of value over the first 3 years that results in €6k/annum depreciation.

Buy a 3 year old car off a main dealer that was €30k new and you'll pay €17k for it probably, keep it say 7 years until it's worth say €3k, you'll experience €2k/annum depreciation.

I don't think €4k/year more is humongous all considered for driving a 0 to 3 year old car compared to a 3 to 10 year old car

€80 a week

Do the same type figures comparing the 0 to 3 year old car to a 3 to 6 year old car and the difference is of course less again.

DaveyDave

Are we saying the person getting 0.9% for example could get €2,500 off? Because that €500 is just the cost of the interest and therefore the same price as someone getting €2k off at 0%.

Now if you're saying they could get €3k off and therefore actually saving €500 more than me, I'd love to see it.

I've seen a few posts saying they had cash and didn't get a better deal but I still haven't seen posts from people saying they got a bigger discount from paying a higher interest rate?

unkel

DaveyDave wrote: »

I've seen a few posts saying they had cash and didn't get a better deal

It's all about the buyers negotiating skills. And not all dealers are willing to play the game (and it depends what car you're buying). To maximise your discount, you need to engage with all dealers in the country

Did it last year, got a substantial discount. No other owner I have spoken to got their car as cheap as I did.

btkm8unsl0w5r4

The manufacturers are giving dealers money to get people on PCP so they can push out new cars. Here the manufacturer pays the dealer interest on the loan money. You take the savage depreciation (aka the dealers profit) on the car instantly.

When you take credit, the credit provider pays the dealer a fee if you use the dealers provider of credit. Your interest rate is higher to you because if this. The dealer wins on the double so negotiate a better deal, or get your own credit at a better rate.

If your on 0% finance, the dealer is already discounting the car to pay the finance interest, or the manufacturer is doing it for them or providing the credit to shift new cars. Not much room to manovure.

There flow of money is always the same. There is no free lunch. Sometimes your in a better negoiating position if your financing, sometimes your not. There is no value in buying new cars no matter what the interest rate...there is pleasure in it but not value.

Lantus

Romina Small Actress wrote:

There flow of money is always the same. There is no free lunch. Sometimes your in a better negoiating position if your financing, sometimes your not. There is no value in buying new cars no matter what the interest rate...there is pleasure in it but not value.

Not much value in any car full stop. They all depreciate at such a rate whatever you buy the resulting value is heading towards zero.

Doesn't seem to stop those who bemoan new cars from buying super expensive smart phones, smoking and drinking etc. There is zero value in cigs and drink, only pleasure. Same for holidays, TVs and all material possessions.

Just get what you want.

dil999

Bob_Marley wrote: »

If a builder said you can buy one of their houses for so called " 0% interest " over the lifetime of the mortgage, but if you try to buy it now without a mortgage we're going to charge you the exact same as the total mortgage price anyways, alarm bells would be ringing, or at least they would be with me anyways.

Volkswagen Group had around €9 Billion in cash at the end of 2016. What better way to invest it than financing an increase in revenues, through 0% finance. A building contractor probably wouldn't have that sort of cash lying around to do the same.

Bob_Marley

dil999 wrote: »

Volkswagen Group had around €9 Billion in cash at the end of 2016. What better way to invest it than financing an increase in revenues, through 0% finance. A building contractor probably wouldn't have that sort of cash lying around to do the same.

That's not the point, the point is why charge cash buyers, who are not availing of finance the hidden finance apr ?

colm_mcm

They’re not charging cash buyers extra FFS. There’s a RRP. You can negotiate a discount off that price, same as anyone else - then you can decide whether you want to do finance or not. Can you confirm that you understand this?

VW make profit on every car they sell here. This is how business is supposed to work.

Bob_Marley

colm_mcm wrote: »

They’re not charging cash buyers extra FFS. There’s a RRP. You can negotiate a discount off that price, same as anyone else - then you can decide whether you want to do finance or not. Can you confirm that you understand this?.

Before cursing and ranting, have you bothered to read the many posts where people have said they didn't get any discount at all off the finance price, when they were paying cash instead ?

The whole point is that is exactly what people should be getting, but many have very clearly been told no cash discount when the so called 0% offers are on.

colm_mcm wrote: »

VW make profit on every car they sell here. This is how business is supposed to work.

No one claimed otherwise, so stop pretending. And the examples I personally know of were not VW but Skoda. (yes before you start, they are VAG, but their offers do differ)

What wer're talking about here is not manufactures making a profit, but charging cash buyers the same as buyers who are are also paying finance costs on top of the cost of the car, thus doubly profiting from cash buyers, who, traditionally got a cash discount.

unkel

colm_mcm used to sell cars for a living, so I reckon he knows what he's talking about...

If people didn't get discounts off the finance price, they probably didn't play the game right

Bob_Marley

unkel wrote: »

colm_mcm used to sell cars for a living, so I reckon he knows what he's talking about...

If people didn't get discounts off the finance price, they probably didn't play the game right

It's nothing to do with a game, it takes no genius to obtain a discount on a list price and price around - you've missed the point, both these people have often negotiated cash discounts from dealers in the past, but were both refused any discount for cash when the zero % were on. Now rightly you'd take your business elsewhere and get a discount, that's not the issue, the ACTUAL issue some of you seem to be missing is these offers are in fact NOT zero % at all as your paying an inflated price for the car.

colm_mcm

Bob_Marley wrote: »

Before cursing and ranting, have you bothered to read the many posts where people have said they didn't get any discount at all off the finance price, when they were paying cash instead ?
.

Do you understand that you can get a discount off the list price regardless of whether you’re doing finance or not?

Cash is of no benefit to a legitimate business these days.