Giving Car back and Owing full Interest

Lexi-Lisa

Hi All
Can someone advise please. My son got a car on finance with Arnold Clarke and within 10 months of paying his job changed and he realised he would struggle with payments, he did ask if he could reduce payments or miss a month until he got sorted and owe at end of loan but this fell on deaf ears and they just said it would be a default. To cut the story short he asked if he could give car back they agreed, so he arranged to take it to them rather than them charge £200 + to collect. His car was to be auctioned. He heard nothing for weeks and rang them but they said they would send him a letter of what he would owe. This they did, but it doesnt tell him what they sold the car for he was not given a copy of receipt or proof of what it was sold for at auction. They now require him to pay the remaining balance which has all the 5 years interest added. He queried this and they said its what they do now, so a car that was sold for £x amount plus 5 years interest is what he has to pay back, for only owning the car for 10 months.. I would like to know please can the car finance do that?...should he not have had a receipt or copy for what the car went for at auction and also can they put all 5 years interest on a vehicle that got sold before it was a year owned from Arnold Clarke then sold at auction?.. I just dont get it , hope someone can help me understand this please. hope this makes sense

poppasmurf_bewdley

Any interest charged isn't on the car, but on the money that is outstanding. If it's been arranged over five years, then the company are entitled to charge interest for five years.

The car has probably been sold at auction at probably less than half what your son paid for it.

molerat

You need to read the terms of the finance and ask assertively for a full breakdown of the charges, a formal complaint may be necessary if they are not forthcoming. Highly unlikely they can charge the full term interest but the settlement figure will be very high in the early stages and at auction the car would fetch peanuts compared to what he paid for it. An expensive lesson learned I fear.

Shakin_Steve

If you take out a loan with a fixed rate, the interest is added to the loan and is paid in equal amounts each month over the period of the loan. So..if you take out a loan for £10000 over five years and the interest on the loan comes to, say, £3000, they will divide the £3000 by 60 and add £50 to each months payment. You also repay the capital in equal monthly amounts.
It's not like, say, a mortgage where your interest payments get smaller as the loan gets older.
In other words, the interest is part of the loan, and they can ask for it all to be repaid. If you ask for a settlement figure halfway through the loan, you don't save any interest.

Lots of car dealers use this method, the finance companies love it.

Cornucopia

What is possible and what legal protections apply depends on the type of finance and the ts and cs in the contract.

I would suggest seeking advice from the CAB in the first instance, at least to get a reasonable idea of whether AC have been unfair in handling the matter.

To be fair to them, though, a forced sale at 10 months is going to attract a large deficit to the finance.

Early settlement terms on cars are typically presented as payment of all the interest, less a rebate covering the early settlement period. Is it possible that this is what AC have done, and your son has misunderstood?

PeacefulWaters

Shakin_Steve wrote: »

If you take out a loan with a fixed rate, the interest is added to the loan and is paid in equal amounts each month over the period of the loan. So..if you take out a loan for £10000 over five years and the interest on the loan comes to, say, £3000, they will divide the £3000 by 60 and add £50 to each months payment. You also repay the capital in equal monthly amounts.
It's not like, say, a mortgage where your interest payments get smaller as the loan gets older.
In other words, the interest is part of the loan, and they can ask for it all to be repaid. If you ask for a settlement figure halfway through the loan, you don't save any interest.

Lots of car dealers use this method, the finance companies love it.

Are you sure about this?

Shakin_Steve

PeacefulWaters wrote: »

Are you sure about this?

That's how it was explained to me by 'The Car People' when I tried to settle early.
The loan was from Black Horse Finance.

Gaz83

Shakin_Steve wrote: »

That's how it was explained to me by 'The Car People' when I tried to settle early.
The loan was from Black Horse Finance.

Then they've explained it to you wrongly.

Shakin_Steve

This is the best I can find:

https://www.thecarloanwarehouse.com/help-centre/apr-and-flat-rate/


When I settled the loan with Black Horse 18 months early, they didn't knock off any interest. Maybe I was mugged.

nomoneytoday

Were you in arrears, or just a standard loan?


I would expect them to calculate the interest due up to 2 months ahead, and then rebate the rest as part of the settlement figure..

Shakin_Steve

nomoneytoday wrote: »

Were you in arrears, or just a standard loan?


I would expect them to calculate the interest due up to 2 months ahead, and then rebate the rest as part of the settlement figure..

If that post was in reply to mine above: No.......no arrears. Just wanted to settle up so I could trade it against a new one.
If it wasn't in reply to mine: Ignore my last.