ADVANTAGES
DISADVANTAGES
Your shares are tied up as you stated.
However you should be able to negotiate a collateral figure that is lower than your shares. If the credit union wants your business badly enough they will do that for you and you won't be tying up all your shares.
I’ve got a 0% car loan last year, which can be repaid early without penalty, via the dealership I bought the car from. (Used car).
The car is technically not mine until I have fully repaid the loan, but for all practical purposes this makes no difference.
Not sure that I would recommend anyone to get a loan from a bank or credit union to buy a car.
There’s quite a few cheaper options available even without going down the pcp route.
Different story of course if you want to guy privately or from some generic used car dealership.
I’ve got a 0% car loan last year, which can be repaid early without penalty, via the dealership I bought the car from. (Used car).
The car is technically not mine until I have fully repaid the loan, but for all practical purposes this makes no difference.
Not sure that I would recommend anyone to get a loan from a bank or credit union to buy a car.
There’s quite a few cheaper options available even without going down the pcp route.
Different story of course if you want to guy privately or from some generic used car dealership.
You didn't get a "0% car loan", you got 0% finance on a PCP/HP type contract, which, despite what you suggest, is significantly different from a practical point of view.
You didn't get a "0% car loan", you got 0% finance on a PCP/HP type contract, which, despite what you suggest, is significantly different from a practical point of view.
So checked the paperwork- it is indeed a Hire purchase contract, with 0% interest.
Going through the contract again, I cannot see a difference to a car loan from a practical point of view.
I don’t own the car until the end of the contract, but the registration cert is in my name, and if I want to sell the car on, all I need is to pay off whatever is left.
Not sure what the “significant” difference would be in your opinion.
I hope this works out for you but I'd be concerned that you've entered into a HP or PCP contract without realising.
There's another thread here somewhere where Brendan breaks down the pros cons of each form of car finance but it goes something along the lines of you being better off with a high interest loan for a car you can afford than a 0% loan for a car you can't afford.
I message I got from it was that people are lured into buying a car they can't afford because there's cheap finance available. Hope you aren't in this cohort.
How one would recommend a 6+% personal credit over a 0% finance is not clear to me.
I understand why you may think this, but you are overlooking the effects of price negotiation.
Buyers using the funds secured via a loan are in a stronger position to negotiate a cash discount on the car than buyers signing up to a 0% finance deal. This is simply because the cost of a car under a 0% scheme also needs to factor in the cost of financing the deal which is not disclosed to the borrower (0% finance is rarely a free lunch). Whether it is possible to secure a cash discount is a different matter altogether and will depend to a large degree on the negotiating ability of the buyer and the supplier's willingness to do a deal.
Getting back to your point. If you are able to secure a cash discount greater than the total interest due on the loan at 6+%, then 0% is not necessarily better. Rather than be seduced by headline percentage rates you should instead calculate the total cost of each financing alternative to determine the cheapest.
But going back to the OP: there is no benefit getting finance from your credit union over a bank, unless you pay less interest.
You are aware that the dealership doesn’t do the finance, so they don’t care?
So checked the paperwork- it is indeed a Hire purchase contract, with 0% interest.
Going through the contract again, I cannot see a difference to a car loan from a practical point of view.
I don’t own the car until the end of the contract, but the registration cert is in my name, and if I want to sell the car on, all I need is to pay off whatever is left.
Not sure what the “significant” difference would be in your opinion.
cars sold on finance are generally sold at the RRP ......
Agreed, if comparing like for like loans.
However I do not agree with your statement...
Actually they do care. A 0% finance scheme is simply a marketing gimmick that disguises the commercial reality of the financing transaction. No finance company lends at 0%. There is an interest cost associated with the finance and that cost is offset against the dealership's gross margin - the borrower is unaware of this as it is undisclosed. In a nutshell the dealership invoices the finance company for the cost of the car, net of the cost of finance.
To illustrate take the example of a car costing €9,000 repayable by 36 monthly instalments of €250 (0% finance to the borrower). Assuming the finance company requires a return of 3% per annum they simply discount the 36 x €250 at 3% p.a. to arrive at the amount they will pay the dealership. In this example the dealership receives €8,597 (say €8,600), so the difference between this amount and the document price of the car is the suppliers contribution to the finance cost i.e. €400. This cost is offset against the dealers margin, which is why they do or should care.
Getting back to the point I was trying to make above re price negotiation; if someone secured a loan at 3% *and* a cash discount of €400, that person would be no worst off than someone taking the 0% finance deal at the full price.
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