Car finance, apr with flat rate?

fmlyhm1148

Hi all
Noob question here. I am thinking of taking out car finance. I was approved for it with an APR of 9.7% (not great I know, but better than 25% stoneacre offered before!) With a flat rate of 5%? I'm struggling to work out how much I'd be spending monthly. Is it 9.7 or 5%? What even is a flat rate? I am new to this jargon. Am I right in thinking, on say £6000, at 9.7% equal 60 payments of £148.50. Or 5%, which would be £125 over 60 months?

I am new to all this jargon and have absolutely no idea.

Hopefully someone can help a n00bie out. Thanks!

fmlyhm1148

9.7% which is a flat rate of 5%*

Craig1981

With a Flat Rate, the interest is charged on the original amount of money you borrowed, and doesn't take into account what has been repaid.

The APR however, takes into account the various extra costs and fees – such as insurance, administration charges and so on – that are involved in the loan on top of the interest. You also only pay interest on the remaining amount.

A Flat Rate agreement might look cheaper because the percentage is lower, but because the interest is charged on the original amount borrowed, it's possible it won't be, and you might end up paying more.

TrickyDicky101

£125 per month.

Total interest paid (over 60 months) using flat rate:

=5% * 6000 * 5 years

=£1500

Monthly: = (£6000 + £1500) / 60 months

=£125

which also equates to an APR of 9.7%

roundbox

Is it even legal advertise it like that?
i.e 5% implies 5%
and not 9.7%

Nearlyold

I doubt whether the 5% (flat) rate was part of an advert.

foxy-stoat

Nearlyold wrote: »

I doubt whether the 5% (flat) rate was part of an advert.

Or they put a "*" next to it. Marketing BS really.

You can buy this £1000 laptop for £500*

* Administration fee charged of £500 at the check out

iolanthe07

roundbox wrote: »

Is it even legal advertise it like that?
i.e 5% implies 5%
and not 9.7%

Car dealerships seem to get away with it; it is a common ploy of theirs to lure people into thinking that the interest rate is lower than it really is. The APR will be there somewhere in the small print.

Nearlyold

iolanthe07 wrote: »

Car dealerships seem to get away with it; it is a common ploy of theirs to lure people into thinking that the interest rate is lower than it really is. The APR will be there somewhere in the small print.

Any Finance Advertising like Posters, Brochures or Flyers in the Dealership will clearly show the Representative APR. What the salesman says to the customer or writes down on the back of a "Fag Packet" may be entirely different of course.