April 13, 2024
Finance

The car finance ‘loophole’ that could save you thousands


In signing the contract you commit to paying back the loan and its interest through a series of monthly installments.

Yet – just like with most other credit agreements, such as buying a sofa or fridge – the credit agreement comes with a 14-day cooling off period, during which you can withdraw from the contract and pay everything you owe upfront.

In cancelling the finance agreement and paying up, it’s easy to imagine that the deposit contribution would be waived. But this – as confirmed by the Finance & Leasing Association (FLA) – isn’t the case, and the customer “won’t have anything to pay back if they cancel the finance”.

Mr Masson said: “In theory, if you take that finance deal and then walk away in the cooling off period by paying it all off, you’ve technically saved £3,000.”

‘I had full intention of cancelling, it’s in everyone’s rights to do it’

One buyer to recently make use of the quirk was Telegraph reader and BMW driver Chun, who purchased a 440i Gran Coupe on finance two months ago.

“I saved around £2,500 by taking on a PCP deal but withdrawing within the cooling off period,” he said. “I can’t even remember what the loan length was as I had no intention of paying 13.9pc interest set by BMW and lining the pockets of others.

“They offered a deposit contribution of around £2,500, so I took it and then cancelled on the fourth day by calling up BMW Finance. It’s very simple.

“I paid everything off with money I had saved in an Isa, and the only extra I had to pay was £22, which was the four days’ worth of interest. There were no admin fees.”

Chun, who said he is “flabbergasted” that more people aren’t aware of the trick, has made use of the hack on multiple occasions when buying a new car.

“If you wait until the 15th day the interest will have increased a lot as it is front-loaded,” he said.

“So you want to make sure you cancel in the 14-day cooling off period, rather than settle at any point after that. Settling will mean you have to pay a lot more.”

As well as benefiting from keeping the deposit contribution, a customer withdrawing in the 14-day window can also keep any add-ons a dealer may have thrown into the package, such as free servicing or extended warranty.



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