Does this seem right

jamesmac911

Hi there I've had a car on finance since April 2021 the car was £10k and the interest is 6k over 5 years. In the 2 years I've had the car I've paid around £6,000 £290 a month of witch £3800 has been lost to interest when I got the car I was told I wouldn't have to pay the full balance if I pay it off early which is technically true but is also misleading as the interest is so high that now in just two years the value of the car is under the settlement figure by about 2k  I've asked for a settlement and if I was able to pay it of today it would cost me £7,500 cars value at the moment is around £5500 and it's only going down. I'm not looking to point fingers on sketchy finance companies nor pass the blame on my part with reading the small print just looking to see if this seems normal after speaking to a friend they are only paying £600 interest over 4 years so £6000 over 5 seems out of this world  thanks in advance 

DullGreyGuy

What are your relative interest rates? 
Presumably you are both on HP deals?

To pay £6k interest over 5 years on a £10 loan would suggest an APR of something like 22%. In 2021 the average loan interest was about 7% which would have been £1,800 interest 

You say your friend is £600 over 4 years but don't say what their initial loan was for. 

Mildly_Miffed

The only important figure on the finance paperwork is the APR.

https://www.moneysavingexpert.com/loans/personal-loan-calculator/ reckons that £10,000 borrowed, £290/month repayments over five years is 24.5%, for a total of £7,435 interest.

But, of course, all this has to be clear on the paperwork you signed to take the finance out... Right? You still have a copy of it? Give us some numbers...

I presume this was some seriously sub-prime finance for a bad credit rating?

Ganga

Mildly_Miffed said:

The only important figure on the finance paperwork is the APR.

https://www.moneysavingexpert.com/loans/personal-loan-calculator/ reckons that £10,000 borrowed, £290/month repayments over five years is 24.5%, for a total of £7,435 interest.

But, of course, all this has to be clear on the paperwork you signed to take the finance out... Right? You still have a copy of it? Give us some numbers...

I presume this was some seriously sub-prime finance for a bad credit rating?

Unless it was payed on a credit card.

DullGreyGuy

Ganga said:

Mildly_Miffed said:

The only important figure on the finance paperwork is the APR.

https://www.moneysavingexpert.com/loans/personal-loan-calculator/ reckons that £10,000 borrowed, £290/month repayments over five years is 24.5%, for a total of £7,435 interest.

But, of course, all this has to be clear on the paperwork you signed to take the finance out... Right? You still have a copy of it? Give us some numbers...

I presume this was some seriously sub-prime finance for a bad credit rating?

Unless it was payed on a credit card.

Credit card wouldn't be a 5 year agreement

daveyjp

Why do I suspect this vehicle was bought following a long discussion about 'affordability'?

Buyer can afford up to £300 a month, that's what they get, not understanding its for 60 months resulting in a huge APR and interest payments.

Veteransaver

The total amount payable on your initial finance agreement is what it is expected to be if you go to the full term.
If you pay it off earlier, you'll pay less interest. Not sure how that is misleading?
The value of the car is irrelevant if it's a simple HP agreement. It is simply a loan secured against the car.
That said, your APR does look very high, especially for an HP taken out in 2021, what rate was given on the agreement you signed?

MEM62

jamesmac911 said:

Hi there I've had a car on finance since April 2021 the car was £10k and the interest is 6k over 5 years.

So you knew that you were paying £16K for a car that was worth £10k and were happy with that.

jamesmac911 said:

In the 2 years I've had the car I've paid around £6,000 £290 a month of witch £3800 has been lost to interest when I got the car I was told I wouldn't have to pay the full balance if I pay it off early which is technically true 

You will pay more in interest in the early part of the term as the outstanding balance (principle) his higher.  It is true that you would pay less overall if you paid early as this reduces the amount of interest you pay.  

jamesmac911 said:

but is also misleading as the interest is so high that now in just two years the value of the car is under the settlement figure by about 2k  

But the value of the car and the amount you pay in interest are not linked.  You know that the value of a car reduces, and in come cases even plummets.  If your expectation was that your payments would be sufficient to keep you in positive equity, that was never going to be the case.

Your case it a perfect example of why taking out a loan to buy an asset with a value that falls like a stone is not the most prudent decision you can make.  Buy something more modest with cash.  It might not have as much street cred and it will still loose value but at least you are not paying interest to watch the value of your car erode.          
 

jimjames

jamesmac911 said:

Hi there I've had a car on finance since April 2021 the car was £10k and the interest is 6k over 5 years.

Presumably this is a second hand car, how old is it?