Car finance help and advise needed

undlou

Good morning,

I can't make sense of the interest charges for my partners car finance. The amount they are charging him is absolutely ridiculous but more fool him for agreeing

to it in the first place.
I am trying to calculate all the charges but I cannot get it to match their figure. I have obviously missed something but I am unsure what.

This is whats on the agreement:
The car was £10410.00
A deposit was paid of £600.00
Total credit given £9810.00
Total interest for credit £7564.00
Acceptance fee £275.00 (included in the monthly instalments)
Title Transfer fee £175.00 (paid at the end with final instalments)
60 instalments of £294.15
APR 29.7%
Rate of interest 27.7%

Am I right to add the two interest rates together (57.4%) and apply that to the £9810.00? That giving a figure of £15440.94. Or have I got that completely wrong? I am clueless with finance. My credit card is so easy to understand and everything adds up, but this I cannot get my head around.
If I am right to say it should be £15440.94, thats plus the £600 deposit, £275.00 acceptance fee, £175.00 title transfer fee equalling £16490.94.

All I want to know is how they got the figure £7564.00?

I would greatly appreciate your help.

verityboo

When you drive off the forecourt in your £10,410 car you will owe £17,649 in finance. If it was written off in a crash a day later the insurance would only pay out market value and you could have serious problems as the finance company would want their money. You could consider GAP insurance but that would increase costs further

I would really reconsider getting such an expensive car if you are only able to get finance with such a high interest rate, £2000 should buy a decent reliable car

Alt

verityboo wrote: »

When you drive off the forecourt in your £10,410 car you will owe £17,649 in finance. If it was written off in a crash a day later the insurance would only pay out marke............

And how exactly does this post answer the Op's query regarding calculating loan interest???


Alt

foxy-stoat

No you dont add the two interest rates together.

Not sure why you want or need to know the total interest, but if you do the maths:

£9810.00 + £275 = £10,085
Less monthly payment of £294.15 = £9,790.85
Add interest @ 27.7% divided by 12 = £226.01
Leaves a balance after month 1 of £10,016.86

Do this for another 59 times and you will get each month's interest. Add them up and you should get somewhere near their total figure for interest charged.

Your partner is better off getting a settlement figure for the loan and finding a cheaper one, if he can. For the first few months he is only paying off £70 off the actual capital out of his £294.15...eek!

Total amount he will pay on the credit agreement is;
£9810 + £7564 + £275 + £175 = £17,824 plus the £600 deposit = £18,424.

Or 60 x £294.15 = £17,649 + £175 = £17,824 plus the £600 deposit = £18,424.

mgfvvc

undlou wrote: »

APR 29.7%
Rate of interest 27.7%

Am I right to add the two interest rates together (57.4%) and apply that to the £9810.00?

No, that's wrong, the 27.7% is the base rate of interest. The APR is higher because that represents the total cost of the loan, including the fees that are not included in the 27.7% figure.

bigadaj

mgfvvc wrote: »

No, that's wrong, the 27.7% is the base rate of interest. The APR is higher because that represents the total cost of the loan, including the fees that are not included in the 27.7% figure.

Are they not allowed to quote flat rate anymore then?

I'd have thought their headline interest would be around 15% given that convenient fiddle.

bigjl

The only advice I can give would be from the perspective that not every persons credit is good but sometimes never having credit doesn't help in the longer term.

With that in mind buying a £10k car wit poor credit is less sensible than buying a cheaper one at half the price and therefore paying it off with lower and more affordable payments or at a higher monthly figure over a shorter period of time

foxy-stoat

bigjl wrote: »

With that in mind buying a £10k car wit poor credit is less sensible than buying a cheaper one at half the price and therefore paying it off with lower and more affordable payments or at a higher monthly figure over a shorter period of time

Paying £18,424 for a car that is worth £10,410 on the day it was bought is a very bad idea......you just have to hope and pray they took out GAP insurance or dont have a total loss in 5 years.

bigjl

foxy-stoat wrote: »

Paying £18,424 for a car that is worth £10,410 on the day it was bought is a very bad idea......you just have to hope and pray they took out GAP insurance or dont have a total loss in 5 years.

Absolutely.

And I would hope they made sure the vehicle was well priced as some dealers that provide finance to those with a poor credit history often inflate the prices aswell.

In this instance buying from a dealer that charges the same regardless is a good idea.

As an example CarGiant charge the same.

If anybody knows of other dealers that have access to poor credit financing aswell as mainstream lending without adding a premium to the car being sold could perhaps add it here.

musafir05

What is the make and model of the car?

Have you considered contract hire? It may work out cheaper for you.

undlou

foxy-stoat wrote: »

No you dont add the two interest rates together.

Not sure why you want or need to know the total interest, but if you do the maths:

£9810.00 + £275 = £10,085
Less monthly payment of £294.15 = £9,790.85
Add interest @ 27.7% divided by 12 = £226.01
Leaves a balance after month 1 of £10,016.86

Do this for another 59 times and you will get each month's interest. Add them up and you should get somewhere near their total figure for interest charged.

Your partner is better off getting a settlement figure for the loan and finding a cheaper one, if he can. For the first few months he is only paying off £70 off the actual capital out of his £294.15...eek!

Total amount he will pay on the credit agreement is;
£9810 + £7564 + £275 + £175 = £17,824 plus the £600 deposit = £18,424.

Or 60 x £294.15 = £17,649 + £175 = £17,824 plus the £600 deposit = £18,424.

That is really helpful, thank you. I will look into finding a cheaper loan. His credit rating is great now so should have some chance in finding one.

As for everyone mentioning the price of the car and the finance, I am totally aware of how ridiculous the charges are and I would never had let him gone ahead with it (this happened before we were together). My partner wanted this car and unfortunately he had zero credit and he was happy to pay the extra. Lesson learnt. A very expensive one at that.