Personal Contract Purchase - Car loans

peterg1965

Does anyone know the formula to work out how much a Car PCP loan costs for a given APR, loan amount and residual figure? It is very easy to work out the Interest calculations, hence monthly payment, on a given APR for a straightforward loan. However, PCP calculations are a complete mystery.

Thanks.

DavidHM

Not a formula, but the average balance of a conventional loan will be a little over half of the loan principal, because the end balance is zero - skewed slightly because less is repaid in the first half of the loan period than the second half of the loan period.

With a PCP, the average balance is just over halfway between the principal amount and the residual value (balloon payment) because the balloon is effectively the outstanding balance at the end of the loan.

This allows you to amortise the loan over a longer period and will calculate a balloon payment for you:

http://www.finance.cch.com/sohoApplets/CompareLoan.asp

but obviously you want to approach it from another direction. It's not too bad if you put the loan term in as three years and the loan amortisation as four or five years to give you a rough idea though.

peterg1965

DavidHM
Got that, it makes sense, and the calculator works nicely thanks.

jerryklarke

[FONT=&quot]Hello everyone, I am 36 years old and I live in Minnesota. I cannot work because I do go in for dialysis and I need a car. But I don’t have that much money and I am looking for a car loan. Would anyone know how I could get a small car loan? I have real bad credit too. How do I get a car loan when I’m on disability? If anyone knows please answer me urgently. Thanks a lot.[/FONT]

inmypocketnottheirs

This is a UK website, therefore not very likely that anyone here can help you.