Ask Honest John Question of the Week: Is unit stock finance normal practice for dealers?

David Ross, Editor
Fri, 31 May 2024

Dear Honest John,

"We've found a good couple of franchised dealer cars recently but HPI has shown outstanding finance on the basis of "unit stocking". The dealers have assured us that this is just their way of financing the cars, but we really are sufficiently put off by this red warning on the HPI to walk away. Is this something we should be concerned about? Also should we be concerned about pre-registered vehicles?"

- R

Dear R,

Unit stocking is a relatively common practice among dealers in order to obtain vehicles to sell without having to fund the entire cost of the vehicle in advance. Dealerships make agreements with manufacturers and finance houses under mercantile credit, which is different type of credit from consumer credit.

Typically the financial agreement is for a limited time of around three months, and when the vehicle is purchased by a customer the finance is settled in order for you to take ownership. This may show up as outstanding finance if you obtain a vehicle history check, but because of the mercantile credit rules it is permitted for the dealer to sell the vehicle without owning it outright.

However, for you own peace of mind we would recommend confirming with the dealer that they will settle the outstanding finance if you choose to buy, and you may wish to get this in writing to ensure there will be no issues in completing the sale.

In respect of pre-registration, pre-registered vehicles should be offered at a discounted price compared to brand-new examples in order to reflect that the buyer is not the first owner. Ultimately it is effectively a secondhand car, but to look at it another way you are buying a secondhand car that will have almost no mileage and is effectively new, but should be considerably cheaper than the same car if you were the first owner.

Ask HJ

What's the difference between a new and a pre-registered car?

What's the difference between a new and a pre-registered car?

A new car is one you order (usually from a dealership) and that is built to your specification (i.e, engine, trim colour, optional extras etc). A pre-registered car is one registered by a dealer. They will order cars (usually in popular colours/trims) and register them ready to sell. Because it’s been registered by the dealer, the clock has started to tick on the warranty and when its first MoT will be due. When you buy a pre-reg car, your name will go down as the second owner on the V5C logbook document, so any subsequent buyer will also know you were not the first registered keeper. The biggest impact this has for you is when you come to sell as many buyers prefer a one-owner history on cars up to around four years old. However, you can offset this by paying less for a pre-reg car that’s identical in every other way to a brand new one. Plus you don't have to wait for the car to be built. Discounts on pre-reg cars range from 5 per cent to 30 per cent depending on the make, model and specification. You should also bear in mind that a dealer will be keen to sell a pre-reg car as it’s getting older by the day and - as a result - depreciating in value.

Answered by David Ross

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