I was asked recently to assist a family member in the purchase of their next car and going with my usual policy of not advising on any particular model unless I am completely against it, we set about a process of elimination. Whilst I obviously used the advice which MTI is happy to endorse on a daily basis, I was keen to let the buyer arrive at a decision himself based on their buying parameters. Firstly we looked at budget, which in this case unusually allowed for the choice between new or pre-owned. Secondly we looked at what the cars primary function would be, in other words who would be driving it, how many miles would it be covering and what sort of journeys it would be used for. My cousin had his heart set on sporty, stylish drop top (lucky him!)
After a lot of deliberation we eventually narrowed the choice down to between a BMW 3 series and an Audi A4 cabriolet, both in my opinion viable choices in every department. Although my cousin had the cash we also looked at some funding solutions through the dealers we approached and I also insisted, as he had what we call a blue chip credit rating, to compare the rate which the dealer offered with his own bank or another high street lender. In today’s market, as we regularly point out, lenders have tightened up their criteria considerably and though there are clearly some great deals around for certain people, in the main the rates available on an unsecured loan are generally not as good as asset backed finance such as hire purchase or PCP’s.
In this case on the car he purchased a significant discount was achieved on an ex-demo which listed at £34,000 including all the extras and I managed to get the car bought for quite a few thousand less. I was just pleased the old magic was still there when it came to negotiating and notwithstanding the obvious advantage I have of being on the inside, my cousin was thrilled with his purchase. The other significant thing was that when he called his bank, which he been a customer of for over 30 years and had several investments with, he fully expected to be informing the dealer that he had no use for their finance and would be bringing in a cheque for the full amount. Except that his bank were miles away from the rate offered by our car dealer!
Even taking into account the fact that an unsecured loan would generally be more expensive and more risky for lenders than asset backed loans, my cousin was still alarmed about the disparity between the two given his relationship and financial standing.
The £20,000 he borrowed from the dealer’s finance house was more than £1,100 cheaper than his own bank and that of any other lender he obtained a quote from! From my point of view it was interesting to experience a ‘real life’ current day purchase from start to finish and underlines the absolute need for any consumer to avoid blindly accepting what is offered to them without first comparing all their options. It is also interesting to note that many people will first visit their bank to arrange finance before even setting foot in a car showroom. The fact is that many of these people may be either turned down flat by the bank and so not even bother visiting a car dealer or be so put off by the extortionate rate they are offered that they give up on the whole exercise altogether. It’s true to say that many people still believe that the bank offers the most reasonable rates of lending and that may have been true to a certain extent in the past but, you guessed it, it’s far from true in this brave new world we find ourselves in now.
In this particular case not only did we achieve a great car for a great price, which must be everybody’s dream, but also by looking at the bigger picture we made a great saving on the finance package. The only slight downer for my cousin is that his wife and children are so happy with ‘his’ new car that he has hardly driven it since it arrived on the drive!
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