Would you take the credit or pay cash?

[Linedbook]

I'm buying a new car. The dealer's "best" price is £1000 more if I pay cash than it is if I take their credit offer, presumably because they make it up in commission.

I've gone for the highest deposit and the shortest term and total cost of credit is nearly £3500. I don't want the credit, I'd rather pay cash, but £1000 is £1000

It's been suggested that I take the credit and pay it off straight away, but I haven't been able to establish what, if any, of the credit charges will still be due. The dealer is unable to show me the T&Cs until the credit is approved (when I could pull out).

What is the norm?

It totally depends on the cost of the credit and cancellation options.
It is pointless taking the credit if you'd have to pay more than £1k in interest/cancellation fees.

I'd take the credit every time and have done. It's not just £1000 cheaper, it's even more than that.

Put the cash you have to pay for the car in a Kroo (or other account that pays interest and allows direct debits) account and set up the direct debit to pay for the car out of that.

Say the credit agreement is £10k over 3 years, the money in the account will earn 4.35% interest, say on an average balance of £5k, as the balance declines, which is another £650 that you're better off.

Depends on the cost of the credit. Presumably it's not zero percent. Often it's where they make their money.

It's not though, becuase I have to pay the £3500 cost of credit and pay tax on the interest earned. Taking the credit still costs £2000+ overall, if I let it run its term

Man I love it when people know this stuff and how to explain it so it makes sense. Boggles my head all that stuff does.

“The dealer is unable to show me the T&Cs until the credit is approved (when I could pull out).”

WTF? I wouldn’t be buying anything from these people whatsoever!

I think it's standard with all the main dealers. They don't get the agreement from the finance company until it's all agreed. I'd obviously see it before I signed anything.

I've always had it explained to me very clearly by the dealership with a breakdown of figures before signing.

I usually take the credit and pay it off after 3 months (the minimum time without penalties atthe dealership I use) in order to get a perk such as free servicing/MOT. The value of the perk is more than the cost of the credit to me.

If they are not prepared to give you a full breakdown then I would be very wary.

Ah, I thought that you meant that even with the cost of the credit, the car was cheaper.

You should still be able to pay the credit off straight away. I had one with VW finance that could be paid off whenever I wanted, but I didn't because it was 0% interest and I did what I said, by having the money sitting in a savings account, but by taking the finance I also got free servicing that wasn't on offer when paying cash.

I don’t like borrowing money, when the dealers are going on about their apr and investment I just say look I want us both to go our seperate ways asap and the deal to be done forever. Maybe some credit deals might be cheaper than cash but that seems really unlikely and my time and head space has a value too, I don’t wanna spend ages researching their finance documents and dealing with repayments for years.

I think bullying people into borrowing money is awful.

@Bjorkdidit

I'd take the credit every time and have done. It's not just £1000 cheaper, it's even more than that

nonsense!

The cost of the credit is £3500
the cost of paying cash is £1000

OP would have to make at least £2500 interest to break even and that seems highly unlikely

What I do is push for the best deal, extended warranty, free servicing, money off, then accept their credit. Make 3 payments then pay it off. I’ve done this with every car I’ve bought.

So you can usually do that and only pay interest/charges for the period you've actually borrowed the money?

Can't they even tell you who the finance provider is so you can research the fees? That seems odd. I had similar buying my last car, I wanted credit for the shortest time possible, the dealership was telling me I could have finance for 2 years but actually the lowest the lender would go is 3 years. But the lender also didn't charge for overpayments and you could do as many as you liked, so I still went for it at 3, but told the dealership off for offering 2 years. They gave me some sort of free paintwork coating protection thing on the car to say sorry/persuade me.

Is it a blatant the car is £20k if taking finance & £21k if paying cash or is it dressed up a bit as getting more for a part exchange (for example) if taking finance? Isn't it illegal in the UK to charge different amounts for something depending on the method of payment? I thought that had been the case for many years. Obviously if you take finance the amount you pay back in the end is higher but the ticket price has to be the same regardless of how you pay.

Walk away.

I doubt whether it's illegal, all the dealers do it across all the brands, but yes, cash price is £29000 (which is £3k less than the list price). If I take the credit the cost is £28000 (plus the £3500 I'll pay over the term of the loan)

Walk away from what? Every single dealer in every single brand does it. I need to buy a car from someone.

There's no way to answer this without knowing the terms.

Never ever sign up to a loan without knowing the full terms and conditions. That is absolute madness, and probably illegal.
Also do not trust any salesperson’s spin about the deal.

I've got no intention of signing anything, but I need to apply for the credit before I see the agreement, which seems a waste of everyone's time if I'm not going to take it.

I know that and will need to check the agreement, I just wondered if there's an industry standard

Omg please OP don't do the credit. It's actually illegal to not tell you the T&C's of a credit agreement. I used to sell credit cards. It would be a criminal offence if I didn't got through the T&C's with the customer and the company would have lost their license. Please done buy this car, research the law on it all please please do not snug anything!!

Sign*

They're not saying I can't see them before I sign, just that they don't have them until we've been through the application process.

I'm told I can repay without penalty after 3 months, which I obviously need to check before I actually sign. I'm just wondering if that's the norm.