All I want to do is pay it off!

bobda

Hello all - I'm a long time subscriber to the MSE emails, but have never needed to call upon advice in the forums...until now.

In March, I bought a used car from a dealer, with finance arranged by them. I will not mention the finance company or dealer unless it will help later on.

I was not in a position to purchase in cash, as I still had my old car, which had a similar value to the new one. I told the dealer this and informed them that I would be paying off the finance agreement as soon as I sold the existing car. They agreed and said that after letting the agreement run for three months, I would be free to pay off the balance of the agreement with no penalties, which I was happy with.

I have now sold my old car and I am in a position to pay off the finance agreement...or, I thought I was.
On calling the finance company this morning, I was given a settlement figure of £40 MORE than the existing agreement figure. This is after having made three payments of £195.50.
According to the finance company, this figure is due to the loan being 'front weighted' (or similar words) and that there is an 'option to purchase' fee of £299 to pay as well. None of this was mentioned at the point of sale - if it was, I would have simply taken out a personal loan (I didn't because of the longer timescales that would have been involved).

I have spoken to the dealer and they are (supposedly) getting back to me. My main issue lies with the lack of, or mis-information I was given at the time of sale. I'm happy to pay the three months worth of interest as it was explained to me.

What is my position?

Some figures to mull over;
purchase price; £6350
deposit; £500
loan amount; £5850 over 36 months
monthly payments of; £195.50
total interest payable over 3 years; £1229.30 (£34.15/month)

£586.50 has been paid from the agreement.

Settlement figure as of this morning; £5890.91

ps - I've got a feeling the loan has something to do with the 'rule of 78' which, again was never mentioned.

Debt_Free_Chick

bobda wrote: »

None of this was mentioned at the point of sale

What did you sign? You should have signed a credit agreement with all this in the small print.

bobda

Yes, I signed a credit agreement. But that was the point of me asking at the time - I wasn't told of any additional fees and that the interest was 'front-weighted' (whatever that means). All I was told was what the 'flat rate' was and the monthly payment amount.

Is there not a piece of legislation introduced by the FSA meaning any additional charges etc have to be clearly explained at the time?

CLAPTON

rule 78 is dead.
This is not allowed anymore.

However, obviously you pay more interest in the first month of the loan as then you owe the full amount 5850 (about £61 in interest)... the second month you pay a little less interest as you have now paid back some capital so the second month the interest has fallen to £60 then down to 58, 57, 55 etc etc.


I assume the APR of the loan was about 12.5% so after three payments you would owe about 5440.
Add on the 299 option to purchase and also they can add a couple of months interest charges ..say 120 then it comes to about 5860 ..which is quite close.

Sorry I have no advice to add unless you have any evidence that they mislead you.
Is all this clear in the credit agreement?

Debt_Free_Chick

bobda wrote: »

Yes, I signed a credit agreement. But that was the point of me asking at the time - I wasn't told of any additional fees and that the interest was 'front-weighted' (whatever that means). All I was told was what the 'flat rate' was and the monthly payment amount.

It's what's in the Credit Agreement that counts - as you signed it.

The CA won't use the term "front end loaded" but it should have set out what you would pay and what you pay if you "cancelled" the CA and paid off the loan early.

What does the CA say?

bobda

Sorry, been busy and not had a chance to update this thread.

The Credit Agreement does indeed tell of the £299 'Option to Purchase' fee - but again, that's not the point I am getting at. I was told that I could pay off the agreement when I sold the previous car (similar value to the new one) and I would have no penalties, just the interest (which I am happy to pay).

I've just rung the finance company again and even though I have made another £200 payment in the meantime, the settlement figure is still the same as the one given almost a month ago.

I have also just been told, when I came to make an overpayment, that I couldn't and it would be refunded to me. They don't hold the required licence, apparently.:mad:

Angry now. If they'd have told me this when I bought the car, I would have simply got a bank loan, paid with that and then paid it off early, which I know you can do, as I have done it previously.

I'm beginning to get annoyed at this. If I can't pay off the loan, I won't be able to afford to live as it's an INTEGRAL all part of my cost-cutting masterplan.