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2.95% loan but interest added at start.good deal?

dc1606
dc1606 Posts: 64 Forumite
Part of the Furniture 10 Posts Combo Breaker
in Loans
I have been offered a loan to buy a car from the garage at 2.95% but this interest on the whole amount is added at the start and then paid off over 3,4 or 5 years. Does this represent a good deal? i.e. could I invest my money safely elsewhere, take out the loan and actually make money on the deal? Or should I just pay cash?
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Comments

  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    10,000 Posts Combo Breaker
    what does that mean?.. it makes no sense to me .. are there any figures?
  • scheming_gypsy
    scheming_gypsy Posts: 18,410 Forumite
    the 2.95% sounds like a good deal but by it being added at the start means (i think) that you'll need to pay the interest in full if you decide to pay the loan off early.
  • dc1606
    dc1606 Posts: 64 Forumite
    Part of the Furniture 10 Posts Combo Breaker
    OK. Thanks. Looks like cash payment then!
  • mrcow
    mrcow Posts: 15,170 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    No no no!

    It's not 2.95% apr. They are trying to mislead you by giving you a stupid flat rate percentage offer.

    How much is it for and what are the actual repayments and over what term? Then you can calculate the apr (if they are not giving it to you up front).

    Good luck with your new car though ;)
    "One day I realised that when you are lying in your grave, it's no good saying, "I was too shy, too frightened."
    Because by then you've blown your chances. That's it."
  • dc1606
    dc1606 Posts: 64 Forumite
    Part of the Furniture 10 Posts Combo Breaker
    13750. 419.68 over 3yrs or 323.29 4yrs or 265.46 5yrs. I guess they'll give me APR if I ask, I think they have to, don't they?
  • mrcow
    mrcow Posts: 15,170 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    They are all at about 6.4% apr according to my calculator.

    Not a bad rate (but you'd probably be better off paying cash if you have it) but you'd also have to check the tie ins and the flexibility etc as you could end up signing yourself up to a contract that is expensive to get out of.

    Also watch out that they don't try and sell you overpriced PPI.

    To compare what else is on the market, you could try moneysupermarket.com

    An alternative is to buy the car on a 0% credit card (we did this with an Amazon card). You'd have to pay a 2% odd fee to the dealer for paying by credit card, but if you can get credit for a high enough amount then you can save money (just remember to switch to another deal in time.....read the credit card boards about card tarting if you are interested in this).
    "One day I realised that when you are lying in your grave, it's no good saying, "I was too shy, too frightened."
    Because by then you've blown your chances. That's it."
  • ManAtHome
    ManAtHome Posts: 8,512 Forumite
    Part of the Furniture Combo Breaker
    Dunno about that - re-check the numbers, looks like a bargain to me.

    Just checked the 3 years - even without compounding you could get over £2k interest on £13750 and total interest looks like £1360 ((419.68 * 36) - 13750).
  • mrcow
    mrcow Posts: 15,170 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    ManAtHome wrote: »
    Dunno about that - re-check the numbers, looks like a bargain to me.

    Were you asking me to recheck the numbers? ;)

    If so, I have and it's 6.4% apr (based on £13750 repaid at £419 per month over 3 years).

    Whichever way you look at it, it's nowhere near as low at the 2.95% that the car dealer was trying to band to the OP.

    edit: actually it's more like 6.2%
    "One day I realised that when you are lying in your grave, it's no good saying, "I was too shy, too frightened."
    Because by then you've blown your chances. That's it."
  • dc1606
    dc1606 Posts: 64 Forumite
    Part of the Furniture 10 Posts Combo Breaker
    Actually got a good deal on the car - they said they were selling at cost to them plus £100. saved about £1090 off list price otr plus 12mths tax. Better than anything I could find on the net.
  • ManAtHome
    ManAtHome Posts: 8,512 Forumite
    Part of the Furniture Combo Breaker
    Getting confussed now...

    My workings for the 3 year were 419.68 * 36 = 15108.48 repaid, basic car cost 13750, so interest paid is 1358.48.

    13750 in 3 years Leeds B/S bond at 6.7% = 2211 after basic rate tax...
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