Hi it is (at least in the US) not unusual that the dealer gets an incentive to finance/lease the car. I make use of it for the same reason you mentioned (no lost $ and still the option to not buy the car). Or you could Lease it for a few month and then just buy it from the bank

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PCP are designed to benefit the dealer. Not the customer. It's about selling cars. Period.

 

It is common for manufacturer finance to subsidise. It is also a questionable practice because cash or credit is supposed to be the same price. However it seems fair to assume that it is structured in such a way as to be ok.

You can of course always exercise your cancellation rights, in which case there may be a possible claw back.

Alternatively you couls allow the finance to start and make 1 payment and then settle. Again the agreed terms may possibly allow clawback. (Edit: much less likely since you have completed the agreement not cancelled)

There are threads here and elsewhere from people who have done both which may help in ascertaining the process and risk.

 

Yes, as stated above, it has been discussed a lot on here already. I think the way round it was to take out the finance (to get the contributions) but then settle it in full in the first 14 day's or similar.

I think you incur one months interest or something like that. But as mentioned, it would be worth just checking the small print to ensure they haven't closed that loop.

 

I bought mine on PCP then just paid it off after a month. No large penalties, it was nice and easy. Just got a phone call from the dealership asking if everything was ok (or to read between the lines, "why are you messing with the finance?") I just told them my wife got a nice large unexpected bonus. Their response was "oh, that's nice"...

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I bought mine on PCP then just paid it off after a month. No large penalties, it was nice and easy. Just got a phone call from the dealership asking if everything was ok (or to read between the lines, "why are you messing with the finance?") I just told them my wife got a nice large unexpected bonus. Their response was "oh, that's nice"...

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I know someone who also did this except with Mini. He always wanted to pay cash but the dealer wanted to do a PCP with a £4k dealer contribution. My mate said 'fair enough' and then settled about a month later, saving himself £4k off the price.

 

Money off cars usually comes in two forms: dealer discount and a finance contribution.

Your dealer is being fair when he says cash isn't king, as he will get commission for selling you PCP. It's not a problem. Once you've taken delivery of the car the PCP clocks starts. If you choose to terminate the contract after 14 days, you'll pay the first month's interest plus a termination fee (or how many months you wait before termination). If instead you cancel the contract, which you have to do within 14 days, you simply pay the daily interest (2-3 quid) for the number of days before you cancel. You keep the contribution, the dealer loses his commission. Simply give BMW finance a call and they'll have it sorted within minutes, no fuss - couldn't be any easier.

The finance contribution is usually the same which ever dealer you go to - currently £3K on a m240i I believe. So what matters is the dealer discount. The best deals would be 13% on total costs - list price of the car, any options and any OTR costs. If you can't get this, then many dealers will do 13% on list plus options (but not OTR costs) - for example, TRL on this forum.

So the choice really comes down to not the cheapest way to purchase but what dealer discount can you get, and do you want to be a cash/loan-buyer or PCP?

 

Thanks for the comments everyone. It seems the dealer discount is unrelated to the finance contribution so I will push for the best figure there. I don't really care about the principle of PCP versus ownership from day 1, so if the PCP deal is better financially then I will go for it, although I do wonder if they might refuse to do a 36 month PCP with around 50% deposit, since the interest on the loan wouldn't be much more than the finance contribution.

 

Thanks for the comments everyone. It seems the dealer discount is unrelated to the finance contribution so I will push for the best figure there. I don't really care about the principle of PCP versus ownership from day 1, so if the PCP deal is better financially then I will go for it, although I do wonder if they might refuse to do a 36 month PCP with around 50% deposit, since the interest on the loan wouldn't be much more than the finance contribution.

30% max. You could make an additional 20% straight up payment to BMW finance but the savings on interest would be minimal - they'd simply reduce your monthlies in order to max the interest repayments in their favour. Again, could borrow the reminder on a cheaper loan and then simply pay off BMW fiance straightaway. You can also haggle over the IR with the dealer - they have room to manoeuvre.

On price, you should be able to get 8K off even a quite minimally spec' car (including the financial contribution) - get a quote from coast 2 coast,

 

FYI, dealer today offered me a PCP deal with 40% deposit (which he said is the max) with total interest over 3 years of about £2.5k but with a £3k finance contribution, which surprised me. Dealer discount is about 8% but he implied there may be room to negotiate on that so I am going to see him later this week.

 

TRL current offer:-

https://www.babybmw.net/forum/viewtopic.php?f=80&t=109280

Coast2Coast are similar

So your dealer then needs to do a bit more. I asuume you plan to settle the pcp pretty much straight away.

 

I will quote TRL at them

I probably won't pay it off right away. Another factor here is that I could put the same amount into my pension and get a lot more than the interest back in tax. Unfortunately I don't have enough cash to do both! I may still pay it back early, depending on cashflow in a year or two from now.

 

Wandering somewhat OT...

The "tax break" on your pension is quite possibly illusory.

You are, of course, correct that you will (under most circumstances) get relief. But unless your tax rate when taking benefits is lower than your tax rate when in work then they will broadly cancel out since 75% of the benefit you eventually receive is taxed.

Of course the figures change somewhat if the payment is made as a gross corporate contribution via salary sacrifice because of the NI saving.

It very much depends upon your personal position, simply stashing it yourself in an ISA may, in many cases, actually be more tax efficient.

 

You could also get a quote on coast2coast. Very similar numbers and a screen print gives you something to beat them up with.

Also of you decide to keep the pcp going bmw will take overpayments which will reduce the interest.

Obviously you are going to be financing the deferred (gfv)value over the term.

 

FYI, dealer today offered me a PCP deal with 40% deposit (which he said is the max) with total interest over 3 years of about £2.5k but with a £3k finance contribution, which surprised me. Dealer discount is about 8% but he implied there may be room to negotiate on that so I am going to see him later this week.

Ah, fair enough, maybe my memory is failing. What I'm not understanding though is why you wouldn't go to coat 2 coast and get 13% or so off (haven't done the exact maths) or why you think that paying 2.5k interest is in some way factored out by a contribution that you can have whether you pay cash (to bmw finance) or not. 8% is poor, and is more in line what I'd expect from a BMW motorcycle dealer (tighter margins).

 

Well as I said, the dealer strongly implied there is room for negotiation on the dealer discount so we'll see what he says when I see him on Friday. I need to look into Coast 2 Coast as I haven't heard of them before and am not too sure how they work, but I got a quick quote from them and did get an apparent 13% discount, and the dealer they were going to put me in touch with is Vines in Crawley, the same company as my local dealer which is Vines in Guildford. If another branch of their company can do 13% discount I don't see why they shouldn't.

As for the BMW finance discount, I know you are right that I could still get this without paying interest if I cancel/pay off the finance straight away, but as I mentioned to another reply I want to make a pension contribution, which for the same amount of money will get me a much bigger tax refund than the interest on this PCP deal. Alas, I don't have enough cash for both.

 

Wandering somewhat OT...

The "tax break" on your pension is quite possibly illusory.

You are, of course, correct that you will (under most circumstances) get relief. But unless your tax rate when taking benefits is lower than your tax rate when in work then they will broadly cancel out since 75% of the benefit you eventually receive is taxed.

Of course the figures change somewhat if the payment is made as a gross corporate contribution via salary sacrifice because of the NI saving.

It very much depends upon your personal position, simply stashing it yourself in an ISA may, in many cases, actually be more tax efficient.

As you say, a bit OT, but I would definitely get the full tax relief. We could discuss the pros and cons of pensions vs ISAs all day, but suffice to say I have both and with judicious use of drawdown, tax allowances, tax free cash and ISA withdrawals I should be able to keep income tax as low as it can be after I retire, so I am pretty confident it is the right decision for me (and my IFA agrees). Plus I have other plans for this year's ISA allowance.

 

Well as I said, the dealer strongly implied there is room for negotiation on the dealer discount so we'll see what he says when I see him on Friday. I need to look into Coast 2 Coast as I haven't heard of them before and am not too sure how they work, but I got a quick quote from them and did get an apparent 13% discount, and the dealer they were going to put me in touch with is Vines in Crawley, the same company as my local dealer which is Vines in Guildford. If another branch of their company can do 13% discount I don't see why they shouldn't.

As for the BMW finance discount, I know you are right that I could still get this without paying interest if I cancel/pay off the finance straight away, but as I mentioned to another reply I want to make a pension contribution, which for the same amount of money will get me a much bigger tax refund than the interest on this PCP deal. Alas, I don't have enough cash for both.

That sound promising! Good to hear.

 

FWIW I bought a car (not BMW) from a dealer last week, anbd whikle I was in a position to pay outright asked what the benefit of taking finance and then cancelling it would be.

The benefit of taking it was 2 years free servicing ......... but they claimed it would take 2.5 hours to do paperwork and get the payment done. As it was already 3pm and I was over 2 hours from home I let it go but thought it was worth mentioning

 

Thanks very much to moulin12 and asb1960 for suggesting TRL and coast2coast. I took the Coast2Coast quote (13% discount) to my local dealer today and they agreed to match without too much fuss (although with protestations that it was their entire margin - true or not I have no idea). £3k BMW contribution on top of that and I am a pretty happy bunny. To top it off, they had a vehicle in the queue at BMW (status 1200?) which they have adjusted to my spec and I might therefore get the car next month.

Thanks again one and all.

 

Glad you are sorted.

I suspect they are pretty close to their margin, but you can be certain their is some fat in it. Also the probably get some bonuses on numbers....

Don't look anymore sonce the next thing you look at is bound to be cheaper. Thats the way it works.

 

Hey, it's great to know when you've been of some help, so thank you for that. No idea of knowing but my dealings also lead me to suspect that 13% is close to margins, and at near that point they're beginning to chase target bonuses.