In recent years, car dealerships have seen their margins eroded. Gone are the days when 65% of all their sales were written on their own Hire Purchase product and with average commissions for selling finance at around £1000, it was a good income stream for them. Recently, this finance penetration has dropped to only 25%.

WHY?

The reason is what they called the Personal Loan nightmare! Increasingly, customers are landing on their forecourts with the cash in their bank having obtained a loan. One thing that British people love is being a cash buyer! Striking a deal and handing over the reddies is a time-honoured tradition in pursuit of a bargain.

But, this may not be the best way. A car dealership has a certain amount of money they 'need' to make out of a deal, and so when they can't make a penny on the finance, they either can't move on the price, or look to make up the money elsewhere by selling ancillary aftercare products such as GAP insurance and SupaGuard polish.

However, there are some great Car Loan products out there with some very attractive rates. Some even give away freebies such as MOT cover, car checks, warranties etc.

But be careful when you want to compare the two products. Personal Loan companies use APRs but Dealerships use FLAT RATES! As a rule of thumb, you can normally double a flat rate to give you the equivalent APR - you have been warned!

Also, a standard HP agreement is 'secured' on the car, so if you default, in most cases, the finance company has the right to repossess the vehicle. This cannot happen with a loan, as the finance is not linked to the asset. Instead, the loan company will pursue you through the normal collections/court procedure to get their money back.

Has anybody got any views on this? Anybody been to a dealership, negotiated the price based on the dealership finance, but then switched and tried to pay with a loan? Did they try and change the price of the vehicle?

Has anybody received one of these freebies with their loan and found its not worth the paper its printed on?

Speak up and help other potential Car Finance/Loan customers avoid the pitfalls!