Personal Finance: The art of being a tough customer

ARE YOU a tough customer? Bargaining hard when choosing your car, mortgage, credit card or investments can save money and prevent sharp salesmen and greedy financial institutions from taking you for a ride. The British aren't raised to haggle, but we are getting better at it.

Cars

A car salesman will exploit your ignorance, says RAC spokesman Rob Maynard. "Make sure you know the value of the car you want. Parker's Car Price Guide, available at newsagents, should give you an idea. You should also persuade the seller to take a realistic view of the car's condition, making a careful visual check and picking out any flaws."

Mr Maynard says it is worth impressing the salesman with your knowledge of consumer protection regulations, even if it means faking it. Mentioning the Trade Descriptions Act 1968, which covers misleadingly described goods, or the Sale of Goods Act 1979, which offers protection for customers who have bought poor quality goods, should do the trick.

You could strengthen your bargaining arm by getting an expert to run a sceptical eye over your chosen motor and pointing out its flaws. The RAC charges pounds 115 for this service, which is also offered by the AA and other motoring organisations.

Roy Staunton, manager of technical information at the AA, recommends trawling the local dealers to get quotes. "Many people rush into the first dealership and pay over the odds. It is far better to play one dealer off against another."

He says 0 per cent finance deals usually mean you are paying too much for the vehicle in the first place. You have to do some haggling. "Nobody pays the full retail price. If you can't get a 10 per cent discount you are doing something wrong. British people are used to paying the asking price but in the car market, forget it."

Mortgages

The days have long gone since you applied to your bank and were grateful to get a loan. Competition has put the consumer in charge. However, the unwary can come unstuck. One of the sneaky things banks do is to charge existing mortgage customers one interest rate, then quote new borrowers a lower one.

Mark Wilson, a jeweller in Newcastle upon Tyne, switched from Northern Rock when he faced exactly this problem. After three years on a discount rate he was tied to the bank's standard variable rate for another four years - 1.75 per cent higher than the standard rate from the bank's direct arm.

Northern Rock refused to give him the lower rate so he switched to Direct Line. Despite paying a redemption penalty of pounds 600 he quickly saved money, cutting his monthly payment from pounds 260 to pounds 195.

If you are thinking of re-mortgaging, arm yourself with a competitive quote from another lender, suggest to your bank or building society that you are about to take your business elsewhere, and ask whether it can match the other deal or offer something better. At this point you may be offered an unadvertised "under the counter" deal. Banks rely on our inertia to make money, and most customers never complain.

Alternatively, there is a mortgage version of the bucket shops, the FirstMortgage Group. It offers loans from high street banks and building societies at a lower rate than if you approached the lender yourself.

Chief executive Nick Deutsch says lenders use its service to increase the overall amount of money they are lending by offering competitive rate mortgages, but without cutting their profits by making these rates available to all customers.

One other point: if your mortgage lender will only give you its lowest rate if you take out its buildings or contents insurance, tell it to get stuffed. You will get as good a rate from another mortgage lender, and can find cheaper insurance elsewhere.

Investments

The truly tough customer can apply these principles to investments. If you arrange your unit trust and other investments through a financial adviser, you may be able to persuade him to share his commission with you. If this seems unlikely, mention the words discount broker and see what happens.

These handy little organisations can save you hundreds of pounds by rebating the commission paid when buying a product, so it goes into your pocket rather than your adviser's. Look out for their adverts in the press: they include PEP Direct, Chelsea Financial Services, The Discount Shop and the PEP Shop.

Paul Penny, managing director of Financial Discounts Direct, says he is currently rebating the full 5.5 per cent commission on the Perpetual PEP, a discount worth pounds 300 if you invest the maximum pounds 6,000 allowed.

Discount houses rebate commission on PEPs, unit trusts, with-profits bonds, life insurance policies and pensions from most of the major providers. They are what are known as execution-only services, so you need to decide which product you want to buy. However, all discounters offer excellent information packs and performance statistics to help you make a choice. (See "Hi-tech investor" on page 19 for information about finding discount brokers on the internet.) These firms make their money on the much lower renewal commission paid for every year you keep your investments.

If you are paying an adviser an hourly fee you should expect all commission to be paid to you, otherwise your adviser is being paid twice.

Credit cards

It can also pay to take a hard line with the company that issues your credit card. Competition means many companies allow you to transfer your outstanding balance at a low rate of interest, for either a limited period(typically six months) or until the transferred balance is cleared.

So, for example, if you have a pounds 5,000 balance and are paying 21.9 per cent with Barclaycard, you could take your debt to Alliance & Leicester and pay a guaranteed 9.9 per cent on its MoneyBack card until your debt is cleared. You will also earn cash back every time you use the card.

Just the threat of switching usually persuades your current card issuer to scrap your annual fee, which may be all you want.

If more customers learned to be a bit bolshie we would all be rewarded with more open and honest financial services. So go on, don't be shy ...

Contacts: A&L MoneyBack card, 0500 838383; Chelsea Financial Services, 0171-351 6022; Financial Discounts Direct, 0500 498477; FirstMortgage Group, 0800 0800 88; The Discount Shop (Garrison), 0171-681 1654; PEP Direct, 0800 413186; The PEP Shop, 0115 9825105.