Have I just been missold car finance?

QueenieK

Hi,
I’m hoping someone may help as I’ve never taken out a loan/finance before in my life and I’m certainly of a certain age!

I bought a car just over 2 weeks ago and had the funds to pay in full. However, I was encouraged to take out £5000 on finance as that was the only way the dealership could give me any kind of discount (£400). I didn’t really want to but was informed it was straightforward and I could pay it off in full after I had made the first payment with no early repayment fees or hidden costs.

I made that payment today (direct debit) so phoned to pay off the remaining amount but when I was given the final settlement figure it was slightly over the amount borrowed so means I’m to pay £115.75 for having the loan two weeks. I argued the point but it seems they are charging me two months interest on the total cost of the car, not even on the amount borrowed! It seems incredible to me that they can charge me interest on my own money that I have paid upfront for the car. I’ve called the dealership who so far say they will speak to someone and get back to me this week. I guess I did get a small discount but feel I’ve been misled as it’s not the amount I was told by the time I have paid this interest. If anyone has advice I’d be very grateful to hear it. Thank you.

Nasqueron

Lenders can charge up to 2 months interest for clearing finance, it is in the terms and conditions you read and signed to say you read. If it's somehow missing you might have a complaint

Brie

I'd say you haven't been missold but they have taken advantage of your naivety when it comes to loans and finance.  Maybe you can take comfort in the thought that at least you are about £285 ahead on the deal.  

CliveOfIndia

On any loan, the lender is entitled to charge an early settlement fee of up to two month's interest (or one, if the loan has less than a year left to run).  That's written in law.

QueenieK said:

was informed it was straightforward and I could pay it off in full after I had made the first payment with no early repayment fees or hidden costs.

That was undoubtedly a bit naughty of them.  Yes, you could argue the toss, and go down the full legal route - although, the key thing is, what did it say in the contract you signed?  Ultimately, what you signed is what's legally binding, no matter what the salesman might have told you.  You did read the contract before you signed it, yes?

QueenieK said:

I argued the point but it seems they are charging me two months interest on the total cost of the car, not even on the amount borrowed!

That's not right.  The lender can charge you an early settlement fee on the loan, but not on the total cost of the car.

Sounds like quite a bit of miscommunication going on here.  Any chance you can give us the precise figures involved?  No need to include personal details, of course !

molerat

The only way to pay minimal interest would have been to withdraw within the 14 day cooling off period.

QueenieK

@CliveOfIndia
The agreement was sent to my phone which was impossible to read and digitally signed which is why I asked for clarity face to face.
The car cost £14213 minus £400. The loan was £5000 and the first payment was £109.45. The interest rate is apparently 11.9% but it says on the full cost of the car!

QueenieK

@CliveOfIndia
the settlement figure is £5006.30

Desmond_Hume

QueenieK said:

@CliveOfIndia
The agreement was sent to my phone which was impossible to read and digitally signed which is why I asked for clarity face to face.
The car cost £14213 minus £400. The loan was £5000 and the first payment was £109.45. The interest rate is apparently 11.9% but it says on the full cost of the car!

Sent to your phone, using a text message? Or email?

QueenieK

@Desmond_Hume
I think it was a text message with a link to the agreement

Altior

Obviously it IS grounds for complaint if the customer was verbally misled (couldn't settle until the first regular repayment). Possibly the finance commission hinged on there being an initial payment before the loan was fully settled. Pursue their complaints process, as it sounds like you are doing, and see where it goes. 

nyermen

Something weird here - the interest rate has to represent the amount being borrowed, it can't be on a larger amount otherwise its not representative.

Otherwise surely every lender would do that if they could to make their interest rates look lower?