Car loan - what does the interest rate mean?

~Brock~

iolanthe07 wrote: »

The comment is not ridiculous. Although there is a legal requirement to show the APR, this is often hidden away in the small print with prominence given to the meaningless 'flat rate'. Other retailers don't do this; why should car dealerships?

The APR is a figure that can be used for comparative purposes, and must be given equal prominence to anything else in credit advertisements and credit agreements. It takes into account ALL prospective costs/charges on a credit agreement, not just the actual interest itself.

As well as the APR, the agreements regulations also stipulate that the rate used to calculate the actual interest must also be shown on credit agreements, together with an explanation as to how the interest is calculated and applied.

This is why you will see two different interest rates on most credit agreements, one of which is usually - and correctly - described as a 'fixed rate', 'flat rate' or 'annual rate'.

What car dealers do or don't do when they explain this to the public is a case should be taken up with them, but to describe the actual interest rate as a 'fraud' is plainly ridiculous and I therefore stand by my comment

~Brock~

nidO wrote: »

No it isn't, it's your comment that's ridiculous.

It's a requirement to show APR.

Agreed, however you do realise that the APR itself is not used to calculate the actual amount of interest to be repaid? The APR is calculated AFTER all the costs are known, including the interest charge.

nidO wrote: »

The whole reason it's a requirement to show APR is so that people actually have a comparable interest rate that uses a known method of calculation, precisely to help prevent people from getting conned by alternatives like flat/fixed rate calculations that look great but aren't.

But flat/fixed calculations are not an 'alternative' for an APR. They are both required to be shown on credit agreements and each serve a completely separate purpose.

nidO wrote: »

Why on earth would you imagine showing flat rate interest is a legal requirement when pretty much the exact reverse is true, with APR being the legal requirement wholly to discourage the use of cons like fixed rate?

Here's the link to the legislation - specifically paragraphs 1(4) which even uses the term 'fixed rate' and 3(4)(f) which specifies the requirement to include the rate in the agreement, separate to the APR which is mentioned separately under 3(4)(h).

http://www.legislation.gov.uk/uksi/2010/1013/pdfs/uksi_20101013_en.pdf

If you still want to argue over this, please take it up with the legislators of the UK consumer credit regulations, cos I'm pretty much done.

CLAPTON

~Brock~ wrote: »

What a ridiculous comment when it is a legal requirement to show it on the loan agreement.......

the 'flat' rate interest rate so beloved by car dealers is a rate derived using the purchase price and NOT the loan amount.

You know this is NOT a legal requirement.

You misunderstand the legislation.

~Brock~

CLAPTON wrote: »

the 'flat' rate interest rate so beloved by car dealers is a rate derived using the purchase price and NOT the loan amount.

I do believe that your original quote said 'fixed' rate interest, and I have no idea where you get this nonsense from about a rate being derived from the purchase price instead of the loan amount.

Your hang up seems to be with car dealers, which is fair enough, but please don't confuse legally required information that has to be provided with stuff that you think a car dealer may have made up.

The original poster asked about the 'fixed' interest rate he had been shown. You said it is a 'fraud'. This is not only incorrect but also a disservice to the original poster who, based on your advice, could quite easily go and accuse the dealer of such. Have you actually read the regulations that I posted a link to above?

CLAPTON wrote: »

You know this is NOT a legal requirement.

You misunderstand the legislation.

Lol...you guys... :rotfl:

I know I don't live on this forum like some but I only tend to post when I know my subject. Why don't you try it sometime?

CLAPTON

~Brock~ wrote: »

I do believe that your original quote said 'fixed' rate interest, and I have no idea where you get this nonsense from about a rate being derived from the purchase price instead of the loan amount.

Your hang up seems to be with car dealers, which is fair enough, but please don't confuse legally required information that has to be provided with stuff that you think a car dealer may have made up.

The original poster asked about the 'fixed' interest rate he had been shown. You said it is a 'fraud'. This is not only incorrect but also a disservice to the original poster who, based on your advice, could quite easily go and accuse the dealer of such. Have you actually read the regulations that I posted a link to above?



Lol...you guys... :rotfl:

I know I don't live on this forum like some but I only tend to post when I know my subject. Why don't you try it sometime?

I used the word 'fixed' in the context of this post. It would have been more clear if I had said "the usual car dealer 'flat' rate".

I'm sorry if I confused you.

Nearlyold

Whilst there is a requirement to state the interest rate there is no requirement to show it as a flat rate, it is still permissible to use a flat rate in the agreement (provided of course the APR is shown) though more lenders (even for car finance) are showing the (real) interest rate that is charged on the reducing balance, which will be much closer to the APR - in fact if the agreement had no fees the (real) interest rate would be pretty much the same as the APR.