Waht's the difference between flat rate and apr?

JVRMac

Hi all

Just bought a car today and thought I'd got a pretty good deal, but I'm just going over the paperwork and now I'm not so sure. I purchased the car with finance and was told that they had arranged finance through Barclays with a loan and the "flat rate" of that loan is 8.08% which was explained that for every £100 I would pay £8.08 interest, ok easy enough I understood all that, but on the paperwork it says:-
rate of interest which apply to credit agreement 8.08%
Annual Percentage Rate of charge 16.4%

Now what I'm wondering is have I taken out an extortionately high loan agreement and if so what can I do, as it says I have the 14 day cooling off period which I thought didn't apply if you signed on the premises?

Any advice would be appreciated.

CLAPTON

flat rate is only used by car salesmen; the true APR to about twice the 'flat' rate so 16.4% APR is about right
whether you can get anything cheaper depends upon your circumstances

opinions4u

Flat rate:

Borrow £1,000 over 3 years paying back £1,300 in total. £300 is interest, which works out at £100 for each year. £100 is 10% of £1,000 so the flat rate is 10%.


APR:

Although you borrowed £1.000, the average balance across the term is £500 (caution: very rough maths at work here!!). The total interest is £300 which is 60% of the average balance of £500. Divide this 60% over 3 years and you get a figure of 20% APR.

In other words, when comparing loans ignore the flat rate and compare APRs.

Apples2

That smiling car salesman was laughing at you inside knowing he had hoodwinked you into believing his waffle.

You can't get out of the purchase of the car (because you signed on the premises) but you can cancel the rip off finance within 14 days.

This means you will need to both secure alternative finance (Personal Loan) and pay the money for the car.
The bonus is that the sneaky salesman will lose the commission he received for fooling you into thinking he was a friendly chap.

Eric_Pisch

16% apr secured on a vehicle is disgusting, unless you have a bad credit rating

8% apr is available for personal loans and I noticed VW had an offer on some cars at 4.5% apr yesterday

smitchy73

I agree, my VW solutions package is at 7.9%, and as Eric above says it seems to be lower on some models of cars just now too by about 3%.