Help with car finance!

neilatc

I'd really appreciate some help or advice guys...

I have this week decided to buy a 2nd hand car. Before I chose a car, I got credit approved by carloan4u.co.uk - £3200 at 8.9% APR (I THINK she said APR!)

I then went to a Ford dealership, and agreed on a car. I told them I had finance agreed, at 8.9% APR - they asked if I would be interested in taking finance from them, if they could beat that price. I said I would - and they came back with a figure of 8.63%, which I agreed, and signed.
However, I've gone through the paperwork tonight and it doesn't make sense to me.... the APR is listed as 24.8% and the 'flat rate' is 8.64% pa.

This is going to work out more expensive for me, and I no longer want it!
I still want the car, but I'm not happy with their finance. Am I committed though, now that I've signed it?

What rights do I have to cancel the finance? It says I have '14 days to withdraw from the agreement' which is financed by MotoNovo - but if I do, I have to pay them the outstanding agreed finance. Which is fair enough.... but I don't think that carloans4u would pay the balance to a finance company, only to a garage?

So, if I can cancel it, is my only option to find another lender for a personal loan.

I'm so annoyed at myself... I didn't realise garages dealt in 'flat rate' instead of APR - in fact until today I hadn't heard of 'flat rate'!

Any advice at all would be hugely appreciated!

DUTR

When you buy something you don't keep looking at the prices there after.
8.9-8.63 is only 0.27 and on the principle it is not a lot of saving.

forgotmyname

If they were both APR it would have saved you £13 if it was over 3 years. or £23 over 5 years.

The issue is your looking to cancel yet you dont know if the previous offer was APR or flat rate.

Dont you want to find out before you ask the question?

dons1983

Yes, I'm going to call carloan4u today to ask if the rate they gave me was APR or not.
If it was, and it works out cheaper, then I want to cancel the ford finance..... Am I able to do that?

dons1983

Hi-
So I've spoken to carloan4u. She says the 8.9% she quoted was a flat rate. And that she told me the actual APR wouldn't be generated til all the paperwork is done, but she 'guessed' around 17%?!

So, excuse my ignorance again, I don't understand 'flat rate'...

If company A offers a flat rate of 8.63% on a £3000 loan, and

company B offers a flat rate of 8.9% on a £3000 loan...


Will company A's loan be better value??

Or is there no relevance between APR and flat rate??

Any help much appreciated!

TradePro

dons1983 wrote: »

Hi-
So I've spoken to carloan4u. She says the 8.9% she quoted was a flat rate. And that she told me the actual APR wouldn't be generated til all the paperwork is done, but she 'guessed' around 17%?!

So, excuse my ignorance again, I don't understand 'flat rate'...

If company A offers a flat rate of 8.63% on a £3000 loan, and

company B offers a flat rate of 8.9% on a £3000 loan...


Will company A's loan be better value??

Or is there no relevance between APR and flat rate??

Any help much appreciated!

IMO, APR just confuses and can be 'worked' in various ways to make a loan look better than it is.

Flat rate is dead easy;

£3000 x 8.63% = £258.90 interest (per year)

£3000 x 8.9% = £267.00 interest (per year)

So, barely anything between the two.

I have to say though, flat rates in that region are pretty high, do you have poor credit? If so you aren't doing too bad, if not you are paying too much.

motorguy

dons1983 wrote: »

Hi-
So I've spoken to carloan4u. She says the 8.9% she quoted was a flat rate. And that she told me the actual APR wouldn't be generated til all the paperwork is done, but she 'guessed' around 17%?!

So, excuse my ignorance again, I don't understand 'flat rate'...

If company A offers a flat rate of 8.63% on a £3000 loan, and

company B offers a flat rate of 8.9% on a £3000 loan...


Will company A's loan be better value??

Or is there no relevance between APR and flat rate??

Any help much appreciated!

The reason companies MUST quote APR is that its the 'Actual Percentage Rate', based on a diminishing balance.

With a flat rate calculation, the interest is calculated on the whole amount.

As trade pro says, £3000 borrow at 10% over 1 year means £300 of interest, however if you were to borrow it over three years, the amount of interest would be £300 x 3 = £900.

BUT at year two, you're still paying interest of £300 even though you perhaps only owe £2000 ish. Likewise at the beginning of the third year you're still paying £300 of interest even though you only owe them approx £1000.

So the actual percentage rate is the rate of interest you would pay if the interest was calculated daily on the diminishing balance.

dons1983

Thanks for all the replies guys - huge help.

Yes, my credit rating isn't great (was living abroad for a while which didn't help), and I was refused a loan at the start of the year.

So it seems that although the garage flat rate is less, they are actually a bit more expensive overall when you add in the admin fee and 'right to buy'

As i've signed it now, it seems too complicated to cancel - I don't think the carloan company would pay money tO the dealers finance company. So I guess I'm stuck with it!

Lesson learned, I'll be a bit wiser next time hopefully!
Thanks for all the help everyone

TradePro wrote: »

IMO, APR just confuses and can be 'worked' in various ways to make a loan look better than it is.

Flat rate is dead easy;

£3000 x 8.63% = £258.90 interest (per year)

£3000 x 8.9% = £267.00 interest (per year)

So, barely anything between the two.

I have to say though, flat rates in that region are pretty high, do you have poor credit? If so you aren't doing too bad, if not you are paying too much.

DUTR

motorguy wrote: »

The reason companies MUST quote APR is that its the 'Actual Percentage Rate', based on a diminishing balance.

With a flat rate calculation, the interest is calculated on the whole amount.

As trade pro says, £3000 borrow at 10% over 1 year means £300 of interest, however if you were to borrow it over three years, the amount of interest would be £300 x 3 = £900.

BUT at year two, you're still paying interest of £300 even though you perhaps only owe £2000 ish. Likewise at the beginning of the third year you're still paying £300 of interest even though you only owe them approx £1000.

So the actual percentage rate is the rate of interest you would pay if the interest was calculated daily on the diminishing balance.

Correct, and then to throw into the mix there is also E.A.R

Back to your example of the diminishing interest
at start up the interest is usally all added at the begining of a bank loan, but as you say based upon the balance reducing over the term, there a quick ready reckoners but in the case of the OP, he won't save much.

Basically (and this is not finite) divide the principle by the loan time eg 3000/36months
gives around £84pm and add the interest to the payments would give around £90.75 for the one lender and £90.53 for the other (well just over on both deals )

worried_jim

Just ask both companies what the total amount payable will be- if they can't give you a price walk away as they are trying to hide the figure from you and rip you off.