Hello all,

 

This is my first post on the forum and if everything works out I will be the proud owner of an Octavia Estate. Please excuse my lack of knowledge on purchasing via car finance as I have never done this before. I was at the dealership recently and we agreed a part HP finance part cash deal on an approved used car. At the time they told me exactly what my monthly repayments would be over the course of the loan term. They then said subject to credit checks I will receive the finance agreement via email within a couple of days. Now having had bank loans and credit cards in the past, I am use to not knowing what my monthly repayments would be until I have had a credit check and been told the APR offered to which I can then accept or reject the loan. 

 

My question is really, how has the dealership been able to inform me of the monthly repayments before a credit check? Did they pull the APR out of a hat, is it subject to change? The reason I ask is because I see Skoda are 7.9% representative at the moment which I know I am not guaranteed to get as it depends on credit rating. But at the moment it looks like they offered me about 10% APR, but how did they already arrive at this amount? I don't have the loan agreement yet, hoping it arrives today as I am supposed to be picking the car up soon. 

 

Apologies if this is immediately obvious, I was in the dealership for so long trying to be sold so many optional extras, I think I just wanted to get out of there and this never crossed my mind at the time.

 

Thanks,  

Hi.

 

Your credit rating won't change how much you pay. The finance company either say YES you can have a loan at 7.9% or NO you can't have a loan.

 

You say you're currently paying 10% APR and Skoda are offering 7.9%...  is that 7.9% not a flat / fixed rate?  Golden rule is anytime you see the word 'flat' or 'fixed' rate ignore that figure and use the APR figure to compare various finance options.

 

All depends on how much you're borrowing but 10% APR doesn't sound very attractive. Wouldn't a bank loan offer better rates? 

 

 

Edited 28 August, 20187 yr by Guest

Thanks, its more that I haven't actually been told the official APR yet. Only that my monthly payments will be x amount by the dealer. I just felt it was strange that the dealer told me the exact payment amounts without first going through all the credit checks. I have wondered if the calculated interest on the amount I am borrowing was derived from that specific dealership just needing to balance their books for that month. It all just seemed a little odd but then having never purchased a car from a main dealer before, I wasn't sure. I am now just waiting to hear from the finance department that it is all OK.

 

Yes 10% is not ideal however it meant as most have done on this forum that I could get 2 years warranty and 2 years free servicing which is more than the interest if I was to purchase separately. I can of course then choose to pay off the loan early.  I am only mentioning the 7.9% (now 7.4%) APR as I have seen it here: http://www.skoda.co.uk/used-cars. But as I understand it, the Skoda dealerships only need to offer that low rate to a percentage of customers, so perhaps they just offered me around 10%.   

Edited 28 August, 20187 yr by JimmyN

The above post by @Scot5 is incorrect. The finance example is based on an "APR representative" basis, whereby at least 51% of applicants must be offered that rate. Others may be offered a different rate. Full definitions on the link below. Ignore the fact the link is credit cards, the APR representative definition applies to any finance/credit product.

 

http://uk.creditcards.com/guides/representative-apr-guide.php

 

So the monthly payment example you were given will likely be based on that representative rate plus whatever you are putting in as a deposit and what term you are taking the HP over.

 

Should you be accepted, you may get that rate or you may get a different rate, depending on your credit history, perceived risk to lender etc. but you will be told the exact rate and payments after the full credit check is made and before you sign. Therefore it may be the same as the indicative amount the dealer gave you, or it could be different.

 

Some lenders are now able to do soft checks before the full application where you are told if you will be accepted or not, and the rate you'd be given if accepted, before a full application and a full credit check is done. I personally haven't seen any car finance lenders doing this yet, and the fact you were given a figure before and you're now waiting from the finance department to see if "all ok" suggests it's the standard representative example prior to your tailored quote following a full credit check.

 

You mention a link between the interest and the dealer's books, however there is no link between the two. The dealer acts as a broker, in this case to Skoda Financial Services and is paid commission if you take out a finance product. The dealer does not lend you the money.

 

I'm not sure how much you are borrowing or the term, however even with the 2 free services (worth £438 max to you or I, costs less to dealer) and extra year warranty, I suspect the interest at 7.4/7.9% would still be more than taking a bank loan at around 3% and haggling to see if you can get any more warranty or services thrown in. 

Edited 28 August, 20187 yr by ahenners

Dealers don't always use Skoda Financial Services.  Black Horse or Close Finance are sometimes used. 

 

Ask who is Financing the deal, You might get a better deal going direct to the Finance Company.

Thanks, that confirms my issue. Knowing that the offer is subject to change once finance make a descision makes more sense after the dealer was essentially offering a rate in principle. Although that wasn’t really made clear. 

 

The costs were added up for all the extras and it did end up being more than the interest so it made sense to me.

 

Sadly the bank didn’t offer much better than the 7.4% representative that Skoda currently offer. But dealer wouldn’t allow a cash buy as I had already haggled £600 off list price and got the 2 year deals providing I go through their finance. So may take banks offer and pay off the Skoda finance. Depends what works out best really. 

10 minutes ago, Auric Goldfinger said:

Dealers don't always use Skoda Financial Services.  Black Horse or Close Finance are sometimes used. 

 

Ask who is Financing the deal, You might get a better deal going direct to the Finance Company.

 

Even for Skoda Approved Used?

3 minutes ago, ahenners said:

 

Even for Skoda Approved Used?

 

Yep even for Approved Used.  My 63 plate Vrs Tdi was an approved used and was on a PCP Financed by Close Brothers Finance. ( 6 month old when I bought it ). ps the car not me

Edited 28 August, 20187 yr by Auric Goldfinger

2 minutes ago, Auric Goldfinger said:

 

Yep even for Approved Used.  My 63 plate Vrs Tdi was an approved used and was on a PCP Financed by Close Brothers Finance.

 

Genuinely didn't know that, only ever seen it offered through Skoda FS or VWFS for Approved Used. Learn something new every day! 

Edited 28 August, 20187 yr by ahenners

After a bit of research on paying off the finance loan early, I cannot seem to find a solid answer on this. There is something about a 14 day period which the agreement can be cancelled and I can instead pay in full if I wish to keep the car. But after that if I wish to cancel I must settle which includes any interest to date. The salesman at the dealership advised us not to cancel or settle too early as it can affect their commission. Can anyone confirm if this is in fact true? I also have 2 years warranty and 2 years free servicing, so would like to keep that if possible, from what I read cancelling the finance doesn't void these. 

 

Thanks, 

Edited 30 August, 20187 yr by JimmyN

Welcome to the forum.

 

'They' might well advise you not to cancel early.   You ignore that though.

 

Always have everything in writing, have that salesperson print off that stuff they are going to look at with 'The Manager', 

ask to see those figures they pull up on the screen and jot on the note pad.

Have them sign stuff, not only you sign stuff, and best have a witness, or just record them, ask their permission. 

Say 'do you mind if i just record that, as George told me that if your lips move you might be lying'.

For their protection and yours.  Keep them honest, it is the best policy....

http://briskoda.net/forums/topic/450524-pcp-when-to-cancel 

 

george

Edited 30 August, 20187 yr by Offski

You can cancel the agreement minuets after the agreement starts and You keep everything in the deal. 

 

I wouldn't worry about the Salesman's commission, it's not in the deal.

 

 

Edited 30 August, 20187 yr by Auric Goldfinger

Thanks for the help, much appreciated.

Just to echo whats been said and my experience cancelling a new PCP. I've had my MY18 VRS for almost a month. Bought on PCP initially (just went with the longest possible term (48 months), smallest mileage (5k) and smallest upfront deposit (£500) - so as to get all quotes based on same figures. Found a great deal which included the £2500 Skoda contribution plus 2 services. Two days after collecting the car I called VWFS and cancelled the contract. They calculated the balance (2 days interest worked out at an extra £6 something) and I was advised I had 30 days to pay off via bank transfer. They sent a confirmation letter a few days later and a just few days ago I cleared the payment. I keep the contribution and 2 services and got a much better rate elsewhere. Very easy process. Happy days.

Edited 30 August, 20187 yr by Ciderspace

Thanks very helpful. I don’t suppose it matters what finance deal it is? I’ve taken out a hire purchase deal. So if I pay off the loan, I own the car. 

Welcome. Sounds about right...