Have I been missold a hire purchase?

Nearlyold

nick74 wrote: »

I used to audit a number of motor trade companies and have seen more vehicle invoices than I care to remember.. The way the figures have been presented to you is perfectly normal. The 'balance to pay' or 'balance to change' or 'balance to finance' figure should never include the interest. The monthly repayment figures should include the interest and I can see from your example that it does.

Exactly right - With HP the Invoice is addressed to the Finance Company anyway, the customer just gets a duplicate copy - it wouldn't make sense for the dealer to invoice the finance company for the interest which is why it's never included.

Nearlyold

Mr.Generous wrote: »

Hmmm my understanding of APR v's interest rate is different from yours then. Presumably no other fees whatsoever and no charges arising if you don't pay a penny for 12 months? APR typically about 3% more than the actual interest rate, on a car loan my guess would be more like 4% higher - OP paperwork should tell us the actual figure but I know it will be considerably lower than 6.5%

Think you are getting a bit confused. Dealers like to quote Flat rate because it sounds cheaper, however a Flat Rate calculation charges interest on the whole of the initial balance for the whole of the term - which in essence means you pay flat rate interest on money you don't owe anymore.


The APR is the real rate of interest and consists of two elements 1) The equivalent annual rate of interest charged only on the declining balance plus 2) The effect of any fees charged (Arrangement and Option to Purchase fees) equated to the annual rate of interest that would give rise to those fees if they were charged as interest.

Fixed fees have a greater effect on the APR for shorter terms, lower initial balances and lower rates of interest.

The APR is usually around twice the Flat Rate because on average the borrower owes approx. half the amount borrowed during the term of the loan - therefore the real rate of interest has to be twice as high as the flat rate to produce the same overall interest charge.