A & L Cancellation Charges

oscarsacco

I have recently taken out a loan of £25000 at 7.9% APR with A & L (was an existing borrower) over 60 months for a car (£498 per month). My intention is to sell the car after 36 months, i.e when £15000 of the capital has been repaid. In theory then, the settlement figure at the 36 month point should be £10000 + one month's interest. Is this how it would actually work? I have posed this question to A & L but they can only give settlement figures up to one month in advance. Ideally I would've taken the loan over 36 months but the payments would've been nearer £800 - too much.

Rafter

You need to check your terms and conditions to be sure, but normal penalty is a percentage of the outstanding balance, not the original loan, so you are correct.

A 5 year loan for a car is ok as long as it is not a heavy depreciator or you are doing high mileage. Otherwise the car could be worth a lot less than the loan outstanding after 3 years.

Next time have a look at someone like northern rock who don't charge repayment penalties I think.

To avoid the penalty, you could always keep this loan to the end and just get a top up loan when you buy your next car for the difference..... if you can afford the repayments that is.

Good luck

R.

oscarsacco

R,

Thanks for the reply. Just to preserve my sanity, pse let me run this past you:

Landrover Discovery TDV6 SE Auto, Metallic, Phone kit.
List Price - £39500
My price - £33000
Projected value after 36 months: Landrover PCP FGMV £17500
What Car? projection £20500

Using the Landrover FGMV (am led to believe they put this lower than what it will actually be worth, to encourage you to use the difference to start a new PCP!)

Am putting down £8000 deposit.
Balance to finance £25000 using A& L loan @ £498 pm over 60 months.
Sell car after 36 months - still owe £10000. Car should be worth (minimum) £17500, i.e. I roughly get my original deposit back at the end. I would hope for it to be worth nearer the £20k though!

Interest charges this way would be approx £2800.
£5600 if I used a PCP at the same APR.

Robert_Sterling

I may be wrong but .......

..... If you are paying off a 5 year loan by equal monthly installments I do not think that after three years you will have paid off three fifths of the loan.

What ever amount you originally borrowed the amount outstanding goes down each month. Each monthly payment is made up of Capital REepayment and interest. Every month the amount of interest paid goes down and the amount of capital payment goes up. In the final month, month sixty, there is very little interest and almost all of the repayment is of capital.

oscarsacco

Robert_Sterling wrote:

I may be wrong but .......

..... If you are paying off a 5 year loan by equal monthly installments I do not think that after three years you will have paid off three fifths of the loan.

What ever amount you originally borrowed the amount outstanding goes down each month. Each monthly payment is made up of Capital REepayment and interest. Every month the amount of interest paid goes down and the amount of capital payment goes up. In the final month, month sixty, there is very little interest and almost all of the repayment is of capital.

Robert,

Many thanks for your reply; I have just realised what an idiot I am, having walked into this loan with a blindfold on. At least I have a couple of weeks to return the loan without being charged. I have been told that they use Actuariel or Actuarial to calculate settlement figures - does anyone know what this means?