PCP interest rates

Towelman

Hi,
I've been quoted an interest rate of 3.56% (6.9% APR) on a PCP deal to buy a car. The total interest payable figure quoted on the projection does not match my calculation for the percentage rate quoted (£19, 495 amount of credit, @ 3.56% charged at £3768.79) 
I've asked both the dealer and Santander to tell me how this is calculated and I'm told its due to a "fluctuating figure" but they are not allowed to divulge further. 
Does anyone know what this fluctuating figure refers too and if this is normal in PCP deals?

Thanks!

Towelman

I should add that was for 42 months.

foxy-stoat

I wouldn't worry about your calculations for the car you will be renting....just look at what they are offering and decide.

Nearlyold

3.56% is the flat rate - charged on the whole of the opening balance for the whole of the term, ie amount borrowed x 3.56% x 3.5 (years)
The APR of 6.9% will be the real rate interest charged (give or take a bit depending on any arrangement or option to purchase fees) on the declining balance.

32Battalion

That's going to be expensive, have you run the figures on loans or leasing?  Choose a different make or model?

Towelman

Thanks everyone. Well that was my query, my figures work out at £2490 so approx £1360 difference, so if thats an arrangement fee it seems a bit steep especially as it isn't itemised. I did look at taking a loan which would be allot cheaper but I'm not sure how easy it is to get such a big loan. 

WaywardDriver

If you have Excel the formula =PMT(6.9%/12;42;-A;B;1) where A = cost of car after discounts/part-exchange (note the minus sign preceding it) and B = balloon payment after the 42 months, will return the monthly PCP payment. You can try alternatives to the 6.9% interest rate until the result agrees with what you were quoted.

AdrianC

Care to show the full set of figures, and let's see if we can figure it out...?

foxy-stoat

Towelman said:

Thanks everyone. Well that was my query, my figures work out at £2490 so approx £1360 difference, so if thats an arrangement fee it seems a bit steep especially as it isn't itemised. I did look at taking a loan which would be allot cheaper but I'm not sure how easy it is to get such a big loan. 

If you want to take out a loan then you need to borrow the full cost of the car, PCP, as you know, your only paying a proportion of the cars value over the 42 months, then you either give it back to pay the balloon payment at the end.

foxy-stoat

AdrianC said:

Care to show the full set of figures, and let's see if we can figure it out...?

His workings:
£19,495 * 3.65% *3.5 = £2,490, at a guess.

Towelman

Hi, thanks for your advice everyone. So the car is £23495. I deposit £4000 leaving 19, 495. Interest is quoted at 3.56% fixed for the duration or 6.9% APR. The total interest charge is £3768.79. There are 42 monthly payments of £275.12 and a balloon payment of £11708.75. Total payable £27263.79.  Maybe i'm missing something but its confusing