car finance for a Tesla Y

Hoenir

Termination clause should be easy enough to find. 

lordmountararat

5.3% Flat Rate is about 11% APR, so quite a high rate for a car purchase. As others have said, in the early months almost all of the payments go towards interest, and it is only in the final months of the deal that you start to see serious inroads into the principal. I don't think it has been front loaded, which has been illegal for many years.

lopsyfa

As others have said, the APR will be much higher than the fixed rate, let's say 11% but you can find this in your contract. As you are still close to the beginning of your contract, the monthly interest is about £487 and out of the £928 you are paying monthly, only about £440 (this will increase gradually with time) will be paying off your capital.

So after about 16 months, you will have paid off about £7000 and have about £46000 in capital left. If your contract was regulated, the lender will be allowed to charge about 2 months interest to settle the contract and this would have been £47000. This value is working on 11% APR and I have used rounded figure to simplify matter. if the APR is higher, the settlement will be higher and vice versa.

However, as your agreement is unregulated, the amount of interest the lender can charge will be in your agreement and this likely accounts for the difference be amount above and not due to front loading of interest. You need to check the contract you signed to look for the terms of early settlement of the agreement,

Loftus_Versfeld

CliveOfIndia said:

Loftus_Versfeld said:

How do I send you the Ts and Cs?

I guess you could scan the documents and post them here, or else give a link to the relevant web page that contains them.  But it may be easier if you can just read them yourself to see what they say about early settlement processing.

I have tried uploading the docs but the forum won't allow me to. The Ts & Cs are vague and there is nothing unusual about the early termination clauses. As I have stated before the contract is a "Non-Regulated Hire Purchase" agreement with a company, so some of the PCP regs with individuals (such as "pay off 50% of the overall loan and you can hand the car back and walk away") do not apply. But, at the same time, that doesn't mean you can make up the rules as you go along. And, I believe, this includes "front-loading" interest. Am I correct? Finally, looking at the figures I have quoted, do you agree the only possible explanation for the quoted settlement figure is that interest has been "front-loaded"?

Loftus_Versfeld

lopsyfa said:

As others have said, the APR will be much higher than the fixed rate, let's say 11% but you can find this in your contract. As you are still close to the beginning of your contract, the monthly interest is about £487 and out of the £928 you are paying monthly, only about £440 (this will increase gradually with time) will be paying off your capital.

So after about 16 months, you will have paid off about £7000 and have about £46000 in capital left. If your contract was regulated, the lender will be allowed to charge about 2 months interest to settle the contract and this would have been £47000. This value is working on 11% APR and I have used rounded figure to simplify matter. if the APR is higher, the settlement will be higher and vice versa.

However, as your agreement is unregulated, the amount of interest the lender can charge will be in your agreement and this likely accounts for the difference be amount above and not due to front loading of interest. You need to check the contract you signed to look for the terms of early settlement of the agreement,

Thanks for your help. Below are the figures I have. Do they fit with your understanding?

The terms of the finance are as follows: 

£53,181.00 was borrowed to be settled by 48 monthly payments of £928.63 with a 49th payment (the so-called balloon) of £24,210.00. 

The finance charges on the contract are £15,603.24 taking the overall cost to £69,134.24. 

The contract quotes a "flat interest rate" of £5.25% per annum.

I have now made 16 monthly payments totalling £14,858.08.

The settlement figure is £51,999.73.

Phoenix72

The finance charges look too high for a flat rate of 5.25%. As I understand it interest is calculated annually on the original amount borrowed. £53,181 @ 5.25% = £2792 x 4 = £11,168.

I could be wrong

noh

There will be an early termination fee which could be as much as the interest you would have paid if you had kept paying for the complete term.
You stated "The Ts & Cs are vague and there is nothing unusual about the early termination clauses" 
What do those early termination clauses say?

enthusiasticsaver

A quick google suggests Novuna personal loans charge 58 days interest on early settlement which is in line with other lenders but obviously the Business loans work differently.  Can you ask them for a breakdown if it is not clear in the Ts and Cs as to whether you get any discount on interest by settling early?  On the figures you quote it appears you might be better investing/saving the settlement amount if you are not getting any rebate due to front loaded interest. This is extremely unusual though simply because it is an unregulated product.  I think I might be inclined to go back to the broker who sold you this loan in the first place. 

Herzlos

Phoenix72 said:

The finance charges look too high for a flat rate of 5.25%. As I understand it interest is calculated annually on the original amount borrowed. £53,181 @ 5.25% = £2792 x 4 = £11,168.

I could be wrong

flat rate of 5.25% would be an APR of 10.5% on a linear loan. It's going to be even higher on a PCP with final payment of 45% the loan amount. I'm not sure how to calculate it exactly but it's going to be sitting about 20% APR since the repayments are only going to pay off 55% of the debt over the term.

20% APR would mean £886 of the £928 payment was just covering interest, and the balance will be coming down by £42/month so the outstanding balance would barely move, with £52,514 left after 14 months.

So the real figure appears to be just shy of 20%, maybe 18ish.

That's a horrific deal but what was agreed to. The best option would be to try and refinance for something sane, which will be hard because the car will be worth nowhere near that. 

Hoenir

Herzlos said:

That's a horrific deal but what was agreed to. The best option would be to try and refinance for something sane, which will be hard because the car will be worth nowhere near that. 

The finance company factored that into their thinking.