Is it a general rule of thumb - that all finance packages can be paid of in advace of the payment plan.
do all finace packages have a rule where the person taking out the deal can pay it off in advance with a lump sum?
i ask - because there is a deal on a ford focus for £9500 my friend wants, but i enquired for her and the dealer didnt want to know as i asked if i could pay it off in a lump sum a few days/weeks after?
apparently he incures a charge - and any talk of paying of a few days/weeks after doing the deal - makes him lose his commission.
when i worked at hyundai - we rarely did finance so its something new to me.
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The finance co. makes the money on the interest. The longer you pay it, the more they make. They pay the dealer a commission based on their profit margin. I expect they have a clawback clause with the dealer if you pay it off early, or they have to do a repo.
What you are suggesting would incur full clawback, and so the dealer would make no commission, and he's probably making nothing (or less..) on the car sale, so he's not going to deal.
The finance co. may well charge for early repayment, by way of a cancellation fee, or insist on xx months notice of early repayment.
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"Is it a general rule of thumb - that all finance packages can be paid of in advace of the payment plan."
In practical terms, no. There are prescribed conditions under which a HP deal can be completed early. Variable-rate bank loans can be paid off early, possibly subject to an admistration charge.
However, some deals include a penalty charge for settling early which is high enough that, in effect, you save nothing by settling early. At least one high street bank offers a (low) fixed rate car loan that falls into this category.
In your friend's case, a personal loan from the bank would probably suit her needs best. And, as always, read the small print carefully first!
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I'd like to know about the loan that saves you nothing if you pay it off early - the CCA prescribes early settlement rebates and in round terms you should not pay more than 2 months extra interest. beyond that which has already been incurred. Do bear in mind though that interest is not spread evenly throughout the agreement - by halfway through the period, over 3/4 of the interest has already been incurred.
Your early settlement rights (including HP) are set in law - it has nothing to do with the dealer, though it is true that their agreements with finance companies often include clawback of commission if an agreement is settled early (so don't tell the dealer if you intend to do this).
The most likely pitfall of dealer finance is the interest rate - ALWAYS shop around. Also buy your own gap insurance and insured warranty if you want them.
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Get a Capital One credit card with the 6 months free credit, but the car on the card and make sure you pay if ogg in tiem. My son has done that very suggessfully. Regards Peter
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Peter D - good suggestion, if you can pay off in 6 months, and the dealer will accept the card.
Otherwise there are cards with up to 9 months interest free on balance transfers, although they mostly if not all now charge a fee for balance transfers (usually 2%, but often capped at £50).
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