Loans

chieffy72

ViolaLass wrote: »

What does this mean?

I've been selling car finance for seven years and I'm not sure even I could explain this clearly!!!
:rotfl::rotfl::rotfl::rotfl:

iolanthe07

ViolaLass wrote: »

What does this mean?

5.4% is probably the flat rate that car dealerships often use to confuse the customer. 12.7% is the APR.

ViolaLass

iolanthe07 wrote: »

5.4% is probably the flat rate that car dealerships often use to confuse the customer. 12.7% is the APR.

I still don't get it, sorry, flat rate for what? If the interest rate is 12.7, what does the 5.4 apply to?

Apples2

Car Salesman use Flat Rate to try to fool punters into thinking it is the APR.

APR is around double.

chieffy72

Apples2 wrote: »

Car Salesman use Flat Rate to try to fool punters into thinking it is the APR.

APR is around double.

Slightly unfair. I personally only ever quote APR but I know that if you walked away from me with a quote of say 7.9% (APR) someone down the road might quote you 6% (Flat Rate) which would work out at roughly 12% APR,some people would get fooled by this.

Flat rate makes it easier to work out repayments,eg:borrow £10,000 over 5 years at 5% flat rate, 5% of £10,000 is £500 so you'd pay £500 interest for every year you take the finance over so you'd pay back £12500 over 60 months at £208.33 per month.

The APR figure is different because you'll be paying the same interest every year (£500) on lower amounts.After 48 months (this is really simplifying it but it might help you get the gist) you'll owe £2000 plus £500 interest,that works out at 20% flat rate if it was a loan by itself so:

Year 1 owe £12000 + £500 interest = 4% Flat rate approx
Year 2 owe £10000 + £500 interest = 5% Flat rate
Year 3 owe £7500 + £500 interest = 7% Flat rate
Year 4 owe £5000 + £500 interest = 10% Flat rate
Year 5 owe £2500 + £500 interest = 20% Flat rate

If you add all the flat rates up then divide them by the term (5) you would get 9.2 which is around what the APR would be. I know finance repayments don't work out as shown above but that method makes it a bit easier to understand...........I hope!

Apples2

If I had either the time or inclination, I would fill a page with links to posts where people have bought cars in the belief it was APR, only to find out later on (too late to cancel of course) that the APR is around double what they thought.

Why can all the other lenders simply state the APR, the total amount payable, the number of payments and the Monthly amount....... but Car salesman can't?

Flat Rate useage is limited almost solely to Car Salesman.... to hoodwink people.

iolanthe07

I don't know how car dealerships are allowed to get away with quoting flat rate - no one else can or does. Have they a special dispensation?

luckylouise08

Hi guys, wow thankyou for all of your replies. Yeah looks like i was very hasty and rash making my decision to get a car on finance without knowing much about loans and also being sold something i had not realised was included! Yeah all i got told at the dealership was the apr at the time i did not get told about a flat rate but i signed the papers so more fool me!

Sometimes u have to make mistakes in life to learn and become more intelligent haha. Good news is ive been approved for a lower rate loan i can pay off in 24 months which covers my car loan settlement straight away. And ive worked out i save over £1500 for switching and changing to pay earlier based on my budgeting. Plus get a 3 month payment holiday and sainsburys double points on all my shopping and a £40 gift voucher. So happy i got advice here, the internet and other areas to do this. Thank u all! Louise