APR Query

geoffken

Having a blond moment sorry.
Have been offered APR 1.9 to finance £17,000 over 2 years of approx £555 interest.
There appears to be no final payment for title transfer at ensd.
Is this good/bad.
we have the cash to pay if needed but if we kept cash in bank could save £25 per month charge which gives us various benefits inc world wide travel insurance AA cover etc.
Grateful for MSE wisdom

molerat

1.9% APR over 2 years gives £338.50 interest, £17555 total over 24 payments = 3.1% APR. What monthly payments have you been quoted ?

geoffken

Thanks for that.
I wondered if it was too good to be true
Can you confirm calculations so I can take them in to dealer.
Am I correct to say APR is twice AER normally
effectively I am borrowing 17000/2 i.e 8500 over 2 years
ie 17,000 first month to nothing in month 24

geoffken

Monthly payment of capital should be 17000/24 or £708 per month and interest should be 550/24 or 22.91 per month.
Dealer has not confirmed figs as we go in tomorrow to finalise deal.

CLAPTON

geoffken wrote: »

Thanks for that.
I wondered if it was too good to be true
Can you confirm calculations so I can take them in to dealer.
Am I correct to say APR is twice AER normally
effectively I am borrowing 17000/2 i.e 8500 over 2 years
ie 17,000 first month to nothing in month 24

no

but some car dealers quote a 'flat rate' which is effectively half the true apr

CLAPTON

geoffken wrote: »

Monthly payment of capital should be 17000/24 or £708 per month and interest should be 550/24 or 22.91 per month.
Dealer has not confirmed figs as we go in tomorrow to finalise deal.

no interest doesn't work like that

you pay more interest on the early months as you owe more, and less interest in the later months when you owe less.

molerat

http://money-saving-calculators.prudentminds.com/apr-calculator.html
http://www.theguardian.com/money/loan-repayment-calculator-interest-rates

A flat rate of 1.9% is 3.7% APR

geoffken

Thanks for that.
I thought I had seen that about APR.
I also realise that it is mainly interest at beginning of loan but divided figs by 24 for ease of calculation.
So they want to charge £550 for allowing me to borrow £8500 (average for a year i.e 17000 in month 1 to 0 in month 24).
Sounds like I need something from them like 2 years free servicing.
Thanks for help in understanding this

jumperjohn

geoffken wrote: »

Thanks for that.
I thought I had seen that about APR.
I also realise that it is mainly interest at beginning of loan but divided figs by 24 for ease of calculation.
So they want to charge £550 for allowing me to borrow £8500 (average for a year i.e 17000 in month 1 to 0 in month 24).
Sounds like I need something from them like 2 years free servicing.
Thanks for help in understanding this

Forgive me if I am wrong but to me that interest rate seems quite good, better than a high street loan rate.

Tixy

jumperjohn wrote: »

Forgive me if I am wrong but to me that interest rate seems quite good, better than a high street loan rate.

That is because its a lot lower risk for the lender than a high street loan.

The debt is secured on an asset, and the ownership of the asset is retained by the lender until the loan is repaid.

To OP, it sounds like you will about breakeven compard to the charge on your bank account (although I guess to view the whole picture you might also want to consider if £300 a year is good value for the benefits that you use - and whether you could get them cheaper elsewhere).

geoffken

To finalise this we went for PCP in end 8500 down, 24 months @ 105 and 13582 to buy as final payment so practically the same costs.
Got 1 free service, full tank and £89 boot cover.
Happy in end as we get to keep 15000 for 2 years.