Understanding the relationship between car finance companies and the dealers that supply new and used vehicles is important for buyers. And yet this is an area in which confusion can arise, especially when people are confronted with the option of accepting a finance package proposed by the dealerships themselves.
So how closely are finance companies and dealers involved with one another, and how does this relationship have an impact on consumers who decide to secure finance to buy their next vehicle?
The Buying Process
When buying a car, van or any other vehicle, individuals and organisations are faced with a fairly transparent initial decision: source the finance independently and use this to pay the dealer, or opt for one of the packages offered by the dealer.
Almost 80 per cent of new car sales are based on one form of finance or another, according to FLA figures for July of 2015, meaning that this is a very popular route to ownership. But something that many people may not realise until later in the process is that many dealers and the finance providers they work with are not actually part of the same organisation.
The upshot of this is that when you take out a finance package to buy a car, ownership is effectively transferred to the finance firm, meaning that you are accountable to this organisation for repayments, fees and upkeep of the vehicle, especially in the case of a hire purchase (HP) or personal contract purchase (PCP) package.
If you negotiate a finance package independently from a firm such as Credo Asset Finance, then head to a dealer to buy a car with a set budget, you are arguably in a position of strength. This is because the apparent in-house finance offered by dealers may have a few caveats to take into account, even if the monthly repayments seem impressive.
Dealers sell finance packages to customers because they will be making more money from the sale of each vehicle as a result. And while this does mean that they are more inclined to offer additional perks for customers, including things such as cut-price servicing packages, dealers will always be driven by the need to turn a profit, so these benefits are being funded by the finance itself.
What dealers do have to offer is the ability to make adjustments to finance deals and negotiate with buyers directly, even if they are working with an outside finance firm. But because this is not always apparent, some buyers may think that the basic dealer finance options on offer are immutable. In reality, there is always wriggle room, and the only way to find out if a better deal is available is to ask.
Before accepting any kind of car finance package, real the small print, check interest rates and look at the full repayable amount while avoiding being seduced solely by the promise of low monthly repayments. The relationship between dealers and finance providers such as Credo Asset Finance may differ, so you must establish where your responsibilities lie.