Finance On The Dealer Floor - Beware!
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  1. #1
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    Default Finance On The Dealer Floor - Beware!

    Last year, my daughter went out to purchase a new small car. Upon deciding on the car, I asked her to see if the dealer had any factory backed finance at around 4.99% which they sometimes do as a sweetener. Not to be, so I told her I would organise finance through the bank (home equity linked) at around 6.9%. Upon hearing this the finance director of the dealership offered finance at 7.2% fixed for the term of the loan with no additional charges. This was a better deal as the bank rate was variable.
    When my daughter returned home she said the car salesman was cool, but didn't trust the finance director. Being rather astute as she is, I took the advice onboard.
    On the day we were to collect the car, the finance director called me and asked for my ABN number. Why I said, this is to be a private purchase not a company vehicle. It will help us streamline the loan he said.
    At this point I knew he was setting it up as a business loan (Interest % rate not required on contract) as opposed to a private loan where interest rate must be shown.
    Upon arrival at the dealership, I knew exactly what my daughter was speaking about in relation to this individual.
    His computer spat out the said contract for signing. "There is a slight problem I said" "what may that be he replied" Well, the repayment per month on this contract is $415-70, but at 7.2% I make it $343-80 per month. Silence followed, after which he said I was wrong, so I pulled the financial calculator out of my pocket and worked it out in front of him. He refused to amend it to 7.2% but as I had sufficient witnesses and my daughter was hot to trot on the new car, I signed it and said I would sort it out with the dealer principal the following week.
    The dealer principal and I spoke the following week, and such a simple case turned into a marathon. I eventually handed the whole thing over to Consumer Affairs who sorted it out within 2 weeks - at the 7.2% as initially offered.
    I spoke to my bank manager about it who said that when it comes to vehicle finance and they are told by their customer that they are too dear, they still give them a written quote as surprise,surprise, the banks 8.2% is often cheaper on paper than the dealers 7.5% offering.
    My accountant tells me that some dealers will add many thousands to the bottom line by quoting one rate and charging another.
    If you have purchased a car in the last year, revisit it and put the figures through a financial calculator, you may well be on the dealers doorstep Monday morning seeking an explanation. Even if you have been touched for $5-00 a week (hard to detect even when the figures look right) thats $1,300 over a 5 year loan. - about the price of a good/great set of tyres.

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  2. #2
    Moderator Alan S's Avatar
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    It's not just the tyre kickers that need watching. I once bought a CX back in the days when they were 5 figures and took out finance via a building society (now a bank in Queensland) based on a % quoted as well as payments.
    I was operating my own businessa t the time and didn't have time to be screwed around by some counter jockey so I went straight to the accountant who took a look at my account and basically authorised me to go ahead and collect the car based on the agreed figues.
    A couple of days later I called in to sign the documentation, a formality and found the interest was almost doubled as were the payments. I refused to sign so the sarcastic bitch of an accountant smugly says "Well, you haven't got an option really have you? You've already got the car."
    With that I produce a set of car keys from my pocket, tossed them on the desk and pointed to the car out in the car park with the question "Ever driven one of those?" She responded in the negative so I suggested she take driving lessons as she now owned it as far as I was concerned. She stood there with the same smart arsed look on the face which promptly changed to one of panic as my wife and I walked out of the office and started to get into a cab.
    "You'll be in awful strife doing this!!" she called out, but when I pointed out that we were share holders in the company and would be transferring all our assets as soon as we got home, the attitude changed again.
    I eventually rearranged my finances through a Credit Union and as I make promises not threats, withdrew all the assets as we said we would along with a full explanation of the reasons why.
    Only then did we discover that this particular organisation does not use the Bank Ombudsman as do most of the other Banks, but we did win anyway and the snarly bitch dealing with us was never seen in the office again, so as I say, it's any financial organisation you deal with that needs watching at all times.


    Alan S
    If it ain't broke, use a 12" shifter.....that usually does the trick!!

  3. #3
    Fellow Frogger
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    Be aware that there are numerous differences between a 'business loan'
    and a 'consumer loan'. Not only do you have reduced disclosure to the customer with business finance, but requirements such as cooling off periods etc. are often not required for the business loan. Consumer legislation (by states) is aimed at protecting the consumer, not so much a person in business, the assumption being that the latter knows exactly what they are doing! Be careful and if you are not sure what you are getting into - don't sign until you are. There is almost always a difference between the apparent interest rate and what you will end up paying over the life of the loan. Although consumer loans require a 'comparison rate', business loans don't, but even then you need to understand how the comparison rate is calculated - it may not relate to your cirsumstances at all.

    Read (and preferably understand) the fine print!

    David

    p.s. On finance generally - be very wary of those no interest or payments for 48 month deals out there now. If you fail to pay up on time it will cost you a lot over the life of the loan. Some can effectively cost you 20%+ pa. It could even be better to be restrained and go without for a while. Easily said I know.

  4. #4
    UFO
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    I love taking time to "read the fine print" on any contract I sign. It really agros the person waiting for you to sign. Besides, the one or two times you find that hidden trap is worth the effort.
    Craig K
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  5. #5
    XTC
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    Quote Originally Posted by UFO
    I love taking time to "read the fine print" on any contract I sign. It really agros the person waiting for you to sign. Besides, the one or two times you find that hidden trap is worth the effort.
    I prefer to take a copy home before signing .. read it at your pace.

    - xTc -
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  6. #6
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    Quote Originally Posted by jester_fu
    I do likewise. Last contract i got 7 days before it was due to be signed, and went over it.
    I guess when it comes to cars the RISK could be considered slightly lower because of the money involved. .. Wait to you start signing against homes and business loans that can run into the 7 figure mark .... Then it's worth having a third party look over it too.

    - xTc -
    You're not fooling everyone, or did you forget? .......




    '02 Peugeot 206 GTi / '07 VW Golf GTI
    Now this is a .sig
    AF'd in PER, MEL, SYD, ADL, CBR

  7. #7
    1000+ Posts Warwick's Avatar
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    I have seen lots of shenanigans in car finance through the years. Makes you feel ill. Finance reps of one broker who are still quite strong in Melbourne would somehow get away with demanding at the point of sign-up a CASH administration fee.
    I like what I see of BMW finance though. They will even reward customers in certain circumstances by decreasing the size of their payout (of current contract as a matter of good will) when they roll over into another BMW. No fees and transparent. They produce a payout schedule on delivery for every month of the contract period. Shafting doesn't happen, consequently the amount of return business in astounding.
    What goes around comes around. Why don't people in the car trade realise this.
    "Now my dream lies shattered like the shards of a broken dream"

  8. #8
    Fellow Frogger!
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    i have been through only 2 cars and a bike. all i can say is, banks are more expensive and finance companies come out cheaper everytime. i usually shop for rates and features.

    latest one I am using is BMW Finance, and I reckon they offer one of the best rates for finance and fleet price. Highly recommended, very efficient and quick turn around with no bull!

  9. #9
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    While I think it is a good idea to read the contract from one end to the other, all it will basically say is if you don't pay they will go you for the money. Whileever you are making payments on time & have adequate insurance cover there is no problem. I doubt you would ever be able to get anything changed that you didn't like either; it's a take it or leave type of thing.

    I had a 505 once that was financed by Ford as they were cheapest on the day; it was all done in 15 minutes or so by a guy with a big pad of contracts in quadruplicate. He filled in the details & looked up the payment amounts in a book of payment schedules, this was after we agreed on the rate over the phone.

    For the C5 I was quoted 10.5% on a lease by the dealer, which is stupidly high. I got them down to the bank rate of 7.2% in a matter of days (helps when the end of month approaches too). I would have loved to get the BMW rate of a couple of percent, but you have to buy a BMW to get that. The message is to haggle - you know when they have reached their limit when the interest in you suddenly drops. Dealers try to make money from all aspects of the purchase so basically everything is negotiable.

    Barry.

  10. #10
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    Barry,

    I'm not sure you have to buy a BMW to get financing through BMW Finance. My understanding is that they'll do any consumer finance, lease etc on any vehicle. I am currently leasing my Honda motobike through them!

    I also have a good friend doing his Alfa through them. The rate is fantastic and I think it's worth shopping around to confirm that they offer the best deal of the day!
    Last edited by blue2th; 4th January 2005 at 01:43 AM.

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