Specialist Motor Finance HP - settlement figure more than I borrowed?

Fighter1986

Hope someone can advise on this:

Purchased a car in January, financed by SMF.

Five year term, no balloon payment, £10 option to buy fee at end of term.

Made four payments so far however I'm now able to refinance the deal to a significantly better rate.

I asked SMF for a settlement figure; which is over £200 more than I originally borrowed (£14,950) despite me having paid them over £1,800 so far.

I understand the APR is high, and that over the course of the loan if I let it run the full 60 months I will pay a lot of interest - but how can the interest charged in any given month equate to more than I've paid in any given month? I understand at the beginning most of my monthly payments will go towards interest and only a small amount off the capital, but it's mathematically impossible to be paying less each month than I'm being charged in interest - if this were the case the loan would never be paid off, quite the opposite, it would continue to increase in balance every month ad infinitum.

Fighter1986

Total amount borrowed: £14,919
APR: 30.89 (I know, don't judge, it isn't productive)
Monthly payment: £458

My calculations suggest Month 1 interest should be circa £385, reducing each month on a sliding scale. That APR and that monthly payment cannot possibly equate to more being owed than borrowed while payments are up to date and no penalties or compounding interest on arrears has been charged. 

Ryan_Holden

Maybe there's a penalty fee in there, is that everything your settlement document says?

TadleyBaggie

Quite likely there is a 2 month’s interest charge for early redemption. What does the contract you signed say about this?

DullGreyGuy

What is the early settlement charge?

Sounds like it was a HP rather than PCP if there is no balloon. 

Penguin_

If there isn't a balloon then this sounds like a HP - whereby you own the car at the end of it.

Herzlos

That sounds about right. You're paying down the balance at about £73/month * 4 months = £292.
But the settlement figure will include 2 months interest as a penalty at about £385 = £770.

So the settlement figure would be more than you originally borrowed, only £200 more doesn't seem too bad.

You'll still save a fortune by refinancing to something with a sensible rate.

Fighter1986

Sorry yes that's right it's HP.

The credit agreement does not mention any additional interest being charged on early settlement, either 30 or 60 days. I've gone over it with a fine tooth comb. 

CliveOfIndia

Fighter1986 said:

Sorry yes that's right it's HP.

The credit agreement does not mention any additional interest being charged on early settlement, either 30 or 60 days. I've gone over it with a fine tooth comb. 

If this is the right website I'm looking at: https://www.smfmotor.com/faqs/

Under the FAQ about Settlement Figures it says "The settlement figure includes an additional 30 days of interest after the settlement date as allowed under the Consumer Credit Act 1974, this is refered to as the Deferred Date."

Fighter1986

It doesn't mention that in the actual credit agreement.

Nonetheless, if that were the case, the total amount due is still out by several hundred. 

Nearlyold

In relation to Early Settlement the T&Cs in the agreement may just say "calculated in line with early settlement regulations" or similar. Under the regs the lender is allowed to post date the assumed settlement date by up to 60 days when calculating any rebate of interest that would otherwise have been charged if the loan had run its full term.