Honda Finance Agreement - Flat Rate vs APR - new claim??

xsp

Hi,

I was reviewing where I am with my car finance and found 2 statements.

I bought a Honda car in June 2021, with an advertised Interest Rate of 2.5% and a product type of "Honda Aspirations".  This was listed on the statement.

The following year, the statement shows product type "PCP Regulated" and interest rate of "4.9% per annum (fixed)".

I always believed I had an interest rate of 2.5%, and in my head when I was buying the car, I was comparing that figure with a bank loan of around 2.9% at the time.  Obviously, 2.5 being less than 2.9, I thought it was a great deal and signed up.  If I had known it was 4.9%, I would have taken the bank loan instead.

I rang Honda and they say "Oh, the system changed so it just shows it in a different way".  Well, 2.5% seems a lot less than 4.9%, and I feel like I've been scammed here.

Isn't this kind of misleading?  Is there a possible claim for mis-sold finance?

Thanks

sheslookinhot

I would ask them to show the workings of both interest rates culminating in the total price you expected to pay.

DrEskimo

As it's PCP finance with a large final payment, the interest rates wouldn't have been directly comparable with a standard personal loan without a large final payment anyway. A PCP finance at 2.5% APR relative to a personal loan at 2.9% would have still been more expensive.

You need to compare absolute costs in interest, not just interest rates when comparing different types of loan repayment structures.

ontheroad1970

As above you have to compare against the capital that is being loaned.  Bank loan At 2.9% on say 30k will be lower amount of interest than PCP because of the final payment never reducing, so only a proportion of the capital is being paid off, much lower than in a traditional bank loan.

Herzlos

Did they explicitly say the 2.5% was APR? Because a 2.5% flat rate would work out around 5% APR which would match their 4.9% figure.

A lot of dealers mention the flat rate because it sounds better than the APR.

Nearlyold

What was the APR  Interest rate in the "Pre Contract Information Document" you were given prior to signing the agreement itself?

What is the APR interest rate in the Finance Agreement you signed?

Your decision to go ahead with the Honds agreement will probably be deemed to be  based on these documents not on any statements you subsequently received .

xsp

I found the original documents when I took out the agreement, and APR was clearly listed at 4.9.  It also lists the 2.5 figure (flat rate).  I just didn't realise there are different interest rates. 

motorguy

xsp said:

I found the original documents when I took out the agreement, and APR was clearly listed at 4.9.  It also lists the 2.5 figure (flat rate).  I just didn't realise there are different interest rates. 

You're stuffed then.  They've given you both the flat rate and the APR (which i think they legally must on the documents you sign).

As per @Nearlyold's comment below, they are both expressions of the same thing.

When comparing interest rates on loans you do need to compare APR to APR.

Nearlyold

xsp said:

I found the original documents when I took out the agreement, and APR was clearly listed at 4.9.  It also lists the 2.5 figure (flat rate).  I just didn't realise there are different interest rates. 

4.9% APR and 2.5% Flat rate are effectively the same interest rate but calculated in a different way. With an APR calculation - the interest payable  is assumed to be calulated on the declining balance. In a flat rate calculation interest is assumed to be calculated on the opening balance for the term of the loan.

Lenders must always state the APR in any loan adverts or documentation etc.

Some also give the flat rate but the APR must have prominence.