Lisa Shepherd February 4, 2016 No Comments

If it sounds to good too be true, then it probably is!

It is becoming very common to see manufacturers adverting 0% comparison rates on purchases of brand new cars. It is not until you get into the dealership until you find out of any “catches”. This form of finance is referred to as “sub-vented finance”.

What sub-vented finance means is that the manufacturer ie Ford, Holden, Mazda etc will pay back the interest to the financier from the profit of the sale of the car, which means the manufacturer needs to keep enough profit margins from the sale price to be able to cover the loss of interest. This means the vehicle price may not be negotiable, or it can only be discounted to a certain value if you were taking up the 0% finance offer. The finance term is generally shortened to a 36 months with a hefty deposit ie 10%-30%. The reason for this, is the shorter the term, the less interest that is payable by the manufacturer. This is turn means higher monthly repayments for the customer which means they fall outside the banks qualifying criteria which in turn gives the salespeople the opportunity to sell as they normally would, including the car salesman, the aftermarket consultant and the Finance & Insurance Manager (or referred to as the Business Manager).

Quite often the dealership will openly advise you of the difference in prices if you opted to take up the finance offer, or not. A dealership knows that half the sale is getting people into their dealership and then they need to create the urgency when face to face with a customer and they will do their best to get a commitment from the customer before the customer can get home to do their own research.

You will find that very limited information will be given over the phone, as the salespeople are trained to only give what is needed and if the client requires more information, they will have to go into the dealership and speak to the Business Manager.

The 0% comparison rate advertising campaigns are just another way to get people into their dealerships, creating more opportunity for sales. Some people take up the offer and some don’t, but still buy the car from that dealership without taking up the finance offer. This also gives the dealership the opportunity to attempt to upsell other products, such as insurances, warranties and aftermarket products to increase the overall margins.

You also need to be very cautious if you have a trade in, as often this will be used as a tool to retain profit margins, where the dealership will undervalue your trade to make up any other loss, so it is good to go in armed with what a realistic trade value is or better yet, sell it privately if you have the time and patience.

All in all in my opinion, you are better off negotiating the best price and financing your car elsewhere. And if you really don’t want to do the  negotiating then call or email me @ lisa@quantumfswa.com.au and I will do the negotiating for you!