Car finance - can someone help me work these values out?

JP1977

Hi - My brother recently bought a new car. I asked him what his deal looks like so I can use it as a benchmark for myself when looking at car finance.

I didn't get as far as looking for myself, as I couldn't work out how much he was actually paying.

I reckon there are some details missing in the below figures to work this out accurately, but I couldn't be certain.

My question is, can someone cleverer than I shed any light on the calculations?

These are the figures he's sent me, but I can't get them to add up.

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My Finance Breakdown

Monthly Payment £259.08

Deposit £0

Term (Months) 48

Fixed Interest Rate 5.66%

Cash Price £16498

Deal Price £17380

Credit Amount £15130

Completion Fee £1

Guaranteed Future Value £7808

Total Amount Payable £19984

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Notes:

Whilst the deposit above says £0, he says he is being given £2500 for his car by the dealer, which is taken into account in the above figures apparently - to me, it looks like there is £250 missing somewhere, which I've asked him about (no answer yet), but even adjusting that deposit to £2250 to shoehorn the values to somewhat match, it still doesn't add up - dealer shenanigans, or confusing loan structure (or both)? I just cannot arrive at that £19984 total figure.

He also says that at the end of the 4 years, he can either give the car back and walk away, or buy the car for an undisclosed amount. I'm sure he'd tell me if I asked, but he didn't send that figure with the above.

Trying to reverse engineer these figures (may a mangle would work better), and adjusting his deposit to £2250 to account for the missing £250, I worked it out that after 4 years, he'll have paid a total of £12435.84 against his £15130 loan (£17380 minus £2250 deposit leaves a loan amount of £15130). This figure of £12435.84 is made up from 48x £259.08 monthly payments.

I worked out the interest on the £15130 Credit Amount to be £3425.43 (5.66% of the original loan amount = £856.358. Multiplied by 4 years = £3425.432 (I *think* this is how fixed interest works?) - this totals £18555.43. Therefore, there's a balance of £6119.59 remaining.

If the future value of the car is £7808 - they would owe him £1688.41 when he hands the car back - he shouldn't just 'walk away' should he? Either they pay him that money when he hands the car back, or allow him to use it as a deposit on his next car, or he pays off the remaining £6119.59 to keep the car?

My original intention was to use his figures as a benchmark for myself, but now I'm wondering if someone has made a mistake in the finance calcs.

Sidenote: If my calcs are correct (probably not), if we assume he will buy the car at the end for the outstanding balance of the original loan, he will end up paying £20805.43 for a £17380 car (and NOT £19984 as quoted in the figured provided). I guess that's the bit I'm trying to arrive at - how much extra is he actually paying above the screen price with dealer finance - I can then use that figure to compare against other types of finance and other deposit amounts etc.

molerat

or buy the car for an undisclosed amount.

Not undisclosed

Guaranteed Future Value £7808

What do these 2 figures actually mean ?

Cash Price £16498

Deal Price £17380

ev51

Looks like PCP given the mention of a Guaranteed Future Value of £7,808.

Roughly, the £259.08 monthly payment is made up of:

£70.19 interest on £7,808 (the GFV)

£188.89 repaying capital+interest on £7,322 (the rest of the loan, i.e. £15,130 - £7,808)

Period is 48 months, so 47 payments x £259.08 + pay GFV or hand back

47 x £259.08 = £12,176.76 + £7,808 = £19,984.76 total amount payable

APR looks to be around 10.9%

The figures you have provided do need checking as the deal doesn't make total sense.

JP1977

Thanks both. Getting closer  

@ ev51 - your calc suggests my brother is paying £3298.93 interest on the £7808 GFV over the term, but only £1545.83 interest on the remaining £7332 over the term. I guess this is the result of the GFV never changing (no capital payments) and ammortisation of the £7332 as this value decreases over time.
But, can you show me how the quoted 5.66% could be used to reach these figures (assuming it's the same rate for both parts of the loan)?

ev51

Yes, the GFV never changes so interest remains the same every month, in simple terms 7808 x (10.9/12) = 70.92 (near enough for the purpose of checking dealers figures).

The other part of the loan is reducing with every payment, higher interest at the start and reducing over time so less interest due overall compared to the GFV.  Excel PMT function can be used for amortisation of that part of the loan, for example, first payment is £125 principal and £65 interest, last £189 principal and £1 interest (all figures are approx.)

The APR is key and should be provided as part of the finance quotation, not just the fixed interest rate.

Edit: The Excel PMT function calculates the payment, you can then caculate the monthly interest, principal and balance for the duration of the loan.

JP1977

That PMT function is really useful, thanks - I love excel but I've never used it for the purpose of working out interest - very good. I've managed to get the figures to balance almost perfectly using that function for an APR% of 10.8271% (very specific, I know) - but still can't fathom how the 5.66% 'fixed/flat rate' is arrived at. I've sent a question to the dealer (Arnold Clarke) in any case to ask them what it actually means. But for now, I have what I need I think. Thanks again.