Arnold Clark interest rate - is it right?

Kryptonite

I bought a used VW Golf from Arnold Clark last year (part finance) and looking back at the paperwork now I am confused about the interest rate and how they arrived at the APR.

I hope someone can help me work out whether I'm being swindled or not.

Here is the agreement doc that AC gave me:

Cash price including VAT: £14493
Advance payment: £10000
Amount of credit: £4493
Total charge for credit comprises: £892.13
Interest: £606.76
Credit Facility Fee: £0
Administration Fee: £285.37
Total Amount Payable: £15385.13

Duration of Agreement: 36 months

Rate of interest on credit: 4.5%
APR: 12.2%

1 payment of £141.66, (which includes the Credit Facility Fee), payable one month after the date of this agreement, followed by
34 payments each of £141.66 payable monthly thereafter, followed by
1 payment of £427.03 (which includes the Administration Fee) payable 36 months after the date of this agreement.

---

I have spent the afternoon playing around with the numbers and I can't see how they have got 12.2% APR from the 4.5% .

I called the finance company (PSA) and the depressed sounding woman on the phone told me that the "Rate Of Interest On Credit" they were sent by Arnold Clark was 8.4% (translating to annual APR 12.2%) - again I can't get the numbers to work out using 8.4%.

So am I just being thick here, or are Arnold Clark being naughty?

molerat

Flat rate interest on £4493 x 4.5% x 3years = £606.55.
Putting the repayment figures into an APR calculator, loan £4493, 35 x £141.66 and 1 x 427.03 gives 12.3%.
8.4% annual rate added monthly on the decreasing balance gives a monthly payment of around the £141.66.

Clive_Woody

Car dealers generally quote flat rate of interest as this sounds better, the APR is much higher.

Kryptonite

Ah. I thought the interest was 4.5% per MONTH because I pay every month...

Which APR calculator did you use? I used this one but I don't know what to put in under Extra Cost:

efunda dot com/formulae/finance/apr_solver.cfm

molerat wrote: »

Flat rate interest on £4493 x 4.5% x 3years = £606.55.
Putting the repayment figures into an APR calculator, loan £4493, 35 x £141.66 and 1 x 427.03 gives 12.3%.
8.4% annual rate added monthly on the decreasing balance gives a monthly payment of £141.66.

DevCoder

Use
http://money-saving-calculators.prudentminds.com/apr-calculator.html
Loan Amount : 4493
Monthly Repayment : 141.36
Num Months : 35
Final Charge : 427.03

Kryptonite

Thanks pal.

I think you meant Num months: 36, Extra Final Charge: 285.37. That comes to 12.2%.

You shouldn't need to use a computer to work it out imho. Too complicated for the average pleb .

krisdorey wrote: »

Loan Amount : 4493
Monthly Repayment : 141.36
Num Months : 35
Final Charge : 427.03

Kryptonite

So does this mean that the 4.5% and 8.4% are both correct, from different angles?

From speaking to PSA I was led to believe that these represented the same "Rate of Interest on Credit" which made me think that AC had sent PSA a different figure than they gave me.

The woman I spoke to was beyond useless though so she may have been looking at the wrong value.

molerat wrote: »

8.4% annual rate added monthly on the decreasing balance gives a monthly payment of around the £141.66.

bigadaj

Back of a fag packet is that flat rate interest quoted by car dealers is around half the apr rate which sort of explains the 4.5% and 8.4%, the leap up to 12.2% is purely a function of getting a bit screwed on the administration fee as the administration fee equates to around a quarter of your total charge for credit.