What's the APR?

[Ian H]

If you borrowed:

£21450 over 48months and paid back £24000

Compared with

£17450 over 48months and paid back £20000

Thanks

 

[IWalkLikeHimaMartian]

It is the annual percentage rate.
If the percentage rate is given, it may be stated as a monthly figure, whereas the APR is an indication of the annual cost of the loan, over the whole term of the loan, including any additional costs.

It is a standard term used to allow consumers to make easy comparisons.

https://www.zillow.com/blog/what-is...est-rate-and-apr-annual-percentage-rate-1005/

 

[rsgaz]

£21450 over 48months and paid back £24000

⁴√(24000/21450)=1.02848032101, so 2.85%

£17450 over 48months and paid back £20000

⁴√(20000/17450)=1.03468616263, so 3.47%


edit: @JohnD is right further down. I was just calculating the annual compound interest rate, which would be right for a savings account, or a debt which you never paid any back over the 4 years.

 

[Ian H]

I was dividing them both by 4 then doing 6000 / 5362.5 = 1.1188 and thinking it was 11.9%

 

[Mottie]

Look at this although I got stuck at step 2.

 

[big-all]

cut it in half as the average owed over the full term will be 50%
looks like around 5.8%
10725+5.8%=11347 +5.8=12005x2=24010

 

[JohnD]

If you borrowed....

I see you have some example figures, perhaps gleaned from adverts or quotations.

The person offering the loan should tell you. If they are reluctant (because their interest rate is shamefully high) it must be on the quotation which you must be given and allowed to read before taking out the loan.

The loans you see advertised on TV are examples where the shark tries to bury the APR in fast-talk and small print. It is sometimes in the region of 2400%

As far as I can make out, the ads are designed in the same way as scam emails telling you you've won $10,000,000 in the California Lottery (that you never entered) or inherited gold from a Nigerian prince. The ads deliberately contain spelling and grammatical mistakes, and make absurd offers. Anyone with any sense would smell a rat and bin them. This starts to make sense when you realise that they are trying to appeal to people who are so thick, or ignorant, or doped, or brain-damaged, that they believe what the ad says; and so are good marks for the scammer. So anyone who responds has self-selected as a gullible mug, and an easy target.

 

[JohnD]

£21450 over 48months and paid back £24000 APR is 5.77%

£17450 over 48months and paid back £20000 APR is 7.072

I have a feeling the difference will be that they include a fixed loan-set-up fee, and/or single-premium insurance policy, on the initial loan, then calculate interest on (loan amount plus fee)

you can check the figs on a loan calculator such as https://www.money.co.uk/loans/loan-repayment-calculator.htm

 

[Ian H]

I was working out a deal that I thought was good on a new car. They offered me PCP at 11.9% but after a test drive and a chat they offered it me at 6.9% which was much closer the the figures I thought acceptable.

Thanks for everyone's help

 

[alan333]

If you borrowed:

£21450 over 48months and paid back £24000

Compared with

£17450 over 48months and paid back £20000

If it's any help - they're both charging £2550 for the term, or £637 per year. This works out at a flat rate of 2.97% on the first example, and 3.65% in the second. Either way you're paying £53/month in interest.

 

[empip]

Purchasing via PCP is a little more tricky to calculate.
With Honda Finance, you have the vehicle price less buyer's deposit less the GMFV (Guaranteed Minimum Final Value) less Honda Finance deposit contribution (if any).
The remainder is calculated as per normal loan not easy to find this figure. To the monthly figure calculated is added the APR times the GMFV times the number of loan years divided by the loan period in months.
If you decide to pay off the loan early, you will be given a figure valid for 28 days - possibly one more scheme payment to make - At least they didn't ask for their £2k deposit contribution to be returned.
I never seem to 'see' a mention of the GMFV interest being charged. Although if one checks out an advert displaying some financial figures the different parts can be assembled.
Have a look at this http://www.honda.co.uk/cars/new/jazz/offers/finance-jazz-s.html
I wonder what happens to the GMFV if one uses the vehicle as a deposit on a new vehicle after the 36 oops! 37 months of the 'deal'...

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[Ian H]

Here's a PCP example at BMW with a £4000 deposit and £10000 final payment on a £23000 car:

 

[empip]

Using this :- https://www.carwow.co.uk/pcp-calculator
Over 48 months PCP @ 6.9% APR : £23k : £10k final payment : £4k deposit
£9k repayable monthly plus interest on £10k I calc'ed £214.23 + £57.5 = £271.73 per month. Was it 6.85% or 6.94% we'll never know !
With £10k final value (payment) possibly reduced by vehicle condition, mileage, etc Or deposit on another motor less the aforementioned.
Kids 'n cars and condition don't always mix - button pressing, panel kicking and other stuff - wonders that they are !
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[Ian H]

That's very interesting, thanks

I can work out how the monthly payments will change after a lump is knocked off.

 

[empip]

Be wary, paying off the odd extra wedge may not be allowed and/or attract a fee, certainly may not work out as we may think it should. Final Value is Final !

I found this thread on MoneySavingExpert :-
https://forums.moneysavingexpert.com/showthread.php?t=5543379

A poster 'Cornucopia' replied here 8th (#8) post in the thread - He knows how it is done !
Most explanations of PCP are loads of waffle, there are plenty of examples on the more respectable car manufacturers web sites.
https://forums.moneysavingexpert.com/showthread.php?t=5543379#8
This guy suggested looking here also :- http://www.thecarexpert.co.uk/car-finance-pcp-explained/
Caveat Emptor - in excelsis ! It is all a fleeting flirtation - in 18 months 'twill be old hat but costing a bomb !!
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