Can anyone help me work out this car finance deal? (Preferably someone who works for a car dealership?)

[lilyblue5]

I am looking for a new car on hire purchase,
Have no car to trade in so starting from scratch.
The car dealership has offered me two deals,
A) small deposit, monthly payments, 0% APR finance.
B) same deposit, slightly less monthly payments, 3.9% APR, they pay almost £2000 deposit towards car that covers the APR.

Comparing the two deals, the 3.9% seems like the better choice as the dealership covers this so I just pay the slightly lower monthly payments.

I just can’t understand why these two offers exist, what am I missing?

I worked in a car dealership years ago and salesmen's commission was factored into the interest on their finance deals.

Would a bank loan be cheaper?

You know I did think it could be commission...
So that would mean if I went for option B) they would get commission on the cost of the car + 3.9%?
If it’s only for that reason I don’t mind, just feeling like the wool was being pulled over...

To be honest, with 0% or even at 3.9% (with their £2000 contribution) I don’t think I would get a loan that good...

Ex car dealer here.

Firstly check it is a straight HP deal. I.e cost of car is £10k, pay £2k deposit then split £8k over 12/24/36/48 months. Own the car at the end. Or is it a PCP? £10k cost of car, £2k deposit then £3k over 12/24/36/48 month’s and then £5k to pay at the end on a balloon payment? You may not necessarily own the car without paying thrballoon payment at the end.

Check the actual price of the car being offered. It could be that the manufacturer owned finance company is offering 3.9% with the contribution and the dealership itself is using the manufacturer contribution to make a cheaper finance offering but a more expensive car. Or the two finance houses are different. Or there are two models of spec in play.

Thanks for your reply,
It’s PCP, so deposit, monthly payments and a balloon payment at the end (though I would trade the car back in once the warranty is up as I do a lot of motorway miles and need reliable car)

What APR counts a good one ?

Ignore the deposit contribution, APR and all the other 'wool' and just look at the money.

What is the total cost ie deposit plus monthly payments, of each deal.

Pick the cheaper one, especially if you just plan to hand the car back after 3 years.

If you think you will want to buy the car, that gets more complicated as you will need to factor in the balloon payment.

Oh, just seen you will then get a new car. In that case, just pick the deal that costs less over the term of the agreement. £2000 is quite a lot so will easily more than offset the interest vs interest free.

That’s all, I’ll dig out the quote tonight and compare the two ☺️

@notmorewashing - the lower the better I think! So 0% being the best, but as the dealership are covering the cost of the 3.9% I’ll do my sums

I usually use online site comparison but maybe it’s worth going to the dealership? I’ve never had a 0%

If it's PCP have you checked the annual mileage allowances? Are they the same?