Paying off car finance early - Reductions?

Jlawson118

I'm not sure if I've made a huge mistake here.

I've had some long term savings as well as my grandad wrote me a cheque towards a new car shortly before he passed away. With this I bought myself a new car, totalling at £23,000.

£3500 was knocked off due to part exchanging my old car, and the dealership being a typical dealership, offered £1000 knocked off if we got finance. They promised if paid off early with the money in the bank, I wouldn't end up having to pay 'much' in interest and final fees.

Since then I've made two month's payments in full, and as far as I'm concerned, there should be around £18,000/£19,000 remaining. Although I checked my monthly credit report on the MSE Credit Club yesterday to find out I owe a massive £25,000!

Now I'm not sure if included is the final balloon payment at the end, or if this is what I will owe even if I settle the finance early. Or say I was to pay this off in the next month or so, would I be paying similarly to what I owe or would I be paying this £25,000?

I keep trying to request a settlement on their website but it isn't working properly

System

The £25k will be the total outstanding if you go full term.

Now I'm not sure if included is the final balloon payment at the end, or if this is what I will owe even if I settle the finance early. Or say I was to pay this off in the next month or so, would I be paying similarly to what I owe or would I be paying this £25,000?

How do you not know if there's a balloon payment, surely you read what you were signing up to when you signed up to a £23,000 car?

Go re-read the paperwork you got, read the boring small print you couldn't be bothered to, everything you need to know is on there. Once you've done that come back.

neilmcl

The balloon is irrelevant, it's just how much they expect the car to be worth at the end of the agreement and how much you should pay then if you choose to keep it. Just phone them and tell them you wish to settle the finance.

neilmcl

Tarambor wrote: »

The £25k will be the total outstanding if you go full term.


How do you not know if there's a balloon payment, surely you read what you were signing up to when you signed up to a £23,000 car?

Go re-read the paperwork you got, read the boring small print you couldn't be bothered to, everything you need to know is on there. Once you've done that come back.

Not really, what he wants to know is the settlement figure because he wants to settle now.

AdrianC

Jlawson118 wrote: »

With this I bought myself a new car, totalling at £23,000.

£3500 was knocked off due to part exchanging my old car, and the dealership being a typical dealership, offered £1000 knocked off if we got finance.

So you borrowed £18,500?

Since then I've made two month's payments in full, and as far as I'm concerned, there should be around £18,000/£19,000 remaining. Although I checked my monthly credit report on the MSE Credit Club yesterday to find out I owe a massive £25,000!

That £25k will include the complete term's worth of interest on the total amount borrowed - including the balloon.

Now I'm not sure if included is the final balloon payment at the end

Of course. It's money you've borrowed... It's just that the amortisation curve - the amount of capital you pay off each month, together with the interest - leaves it as an outstanding amount at the end of the term.

or if this is what I will owe even if I settle the finance early. Or say I was to pay this off in the next month or so, would I be paying similarly to what I owe or would I be paying this £25,000?

Somewhere in between the two. You won't be paying further interest on the money you no longer owe, but you will need to compensate the finance house for the loss in profit they expected to make from the contract.

I keep trying to request a settlement on their website but it isn't working properly

<passes telephone>

parking_question_chap

Dont believe anything a car dealer tells you unless its in writing.

CardinalWolsey

Unfortunately there will be a significant difference between cancelling the finance within the 14 day cooling off period, and settling the finance two months in to the agreement. The first would have been treated as if the finance never existed (in financial terms - cancel the agreement, refund the finance company the money you borrowed) - no interest or charges due. Settling the finance will now mean that interest has accrued and the finance company will want recompensing for the lost income by you settling early.

motorguy

CardinalWolsey wrote: »

Unfortunately there will be a significant difference between cancelling the finance within the 14 day cooling off period, and settling the finance two months in to the agreement. The first would have been treated as if the finance never existed (in financial terms - cancel the agreement, refund the finance company the money you borrowed) - no interest or charges due. Settling the finance will now mean that interest has accrued and the finance company will want recompensing for the lost income by you settling early.

They are not allowed to charge a disproportionate amount though. Yes, there will be interest charges, but not thousands.

Nebulous2

What's the apr?
Why didn't you pay it off right away?
Do you intend paying it off now, or are you only checking the figure?

motorguy

Nebulous2 wrote: »

What's the apr?
Why didn't you pay it off right away?
Do you intend paying it off now, or are you only checking the figure?

I'm going to hazard a guess and say 10.9% APR if total payable is £25,000 on a loan of £18.5K.

It sounds very like the dealers BMW / MINI / VW have been running whereby you get a finance contribution, but the interest rate is heavy.

neilmcl

motorguy wrote: »

I'm going to hazard a guess and say 10.9% APR if total payable is £25,000 on a loan of £18.5K.

It sounds very like the dealers BMW / MINI / VW have been running whereby you get a finance contribution, but the interest rate is heavy.

The typical APR for new cars is never that high, BMW's for example, is only 4.9%.