Hello all,

My first post.....

Just signed up for a new Grande Punto Sporting 130.
Need to finance part of it as part of a company car allowance.
Decided to make payments over 2 years.

Wasn't really a USP for me but the advertised 5%APR was nice I thought.

So did the paperwork on Friday. When I checked it today, it's nothing like 5%!! Actually works out at 12.4%.

Spoke to the dealership and they calculate the total interest as
(5%x 2 years) x Purchase price
This is schoolkid maths, any other personal loan is calculated on compound interest monthly after taking each month's payment into account.
Also taking into account the fees, another £200 nearly doubles the charges compared to elsewhere..

This is my first new car and personal loan/finance (even though I am 38!)
Am I missing something or are they trying to pull a fast one (esp as they advertise 5% APR)?

Ultimately I will go elsewhere for the finance, as it's not part of the great deal I got on the car.

Cheers
Adrian

and you're surprised why? all car finance is like that, but most people see the quoted figure on a tv advert and dont even think to check out the deal in detail before signing the forms. its even more amusing when you work out the total amount payable on an "interest free" deal. interest free my arse, it is always cheaper to get a bank loan. never buy a car on finance. if you get a bank loan you pay less interest and you can get a bigger discount on the rrp (or more extras thrown in).

jug said:

it is always cheaper to get a bank loan. never buy a car on finance. if you get a bank loan you pay less interest and you can get a bigger discount on the rrp (or more extras thrown in).

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The cheapest way is to pay it out right - no interest whatsoever.

the Words "UPTO" would appear before the words "5% APR"

lol..

usually the longer you borrow/ more you borrow, for the lower the rate

luvduvs said:

The cheapest way is to pay it out right - no interest whatsoever.

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very true, thats the only way i've ever paid, and the only way i ever will. but thats why i drive an old fiat instead of a new 3 series like most of the poeple at work. i laugh at them, they laught at me, but they pay a lot more so i laugh harder.

jug said:

very true, thats the only way i've ever paid, and the only way i ever will. but thats why i drive an old fiat instead of a new 3 series like most of the poeple at work. i laugh at them, they laught at me, but they pay a lot more so i laugh harder.

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Interesting how you mentioned that. Depending on how you look at it those people who drive expensive cars when they clearly cannot afford it (e.g. they didn't pay for it themselves, or they pay outrageous interests) are really just kidding themselves. Sure most people would love to own nice cars, but as long as there is finance on it they can't really say they own it 100%.

exactly they dont own it, but that doesnt matter when you're trying to convince strangers that you're wealthy. its sad really, i feel sorry for them. plus they lose everything if they lose their job for a few months.

many people like that have also have interest only mortgages on their homes, meaning they never actually pay for the house, they only pay the interest. so they get to have a big posh house to show off, but once the mortgage is paid they still dont even own a house and they have to pay for the house. what a short sighted approach to life.

i was brought up with the traditional belief that if you cant afford something you save up for it. a buy now pay later lifestyle means you pay more, which in the long run means you get less in life.

The calculation they used was based on 5% FLAT RATE, not APR - I would go back and have a serious moan at them.

I have bought most of my cars on hire purchase [although the Stilo was paid for on debit card ] - usually short term though, the Ulysse only being 2 years - still, went through the business, so at least got tax relief on the interest element

ta for the comments

jug said:

and you're surprised why?

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as I said mortgage aside this is the first thing I've financed, I have no experience of new cars/loans as I have only ever driven classic cars daily. New cars are a complete waste of money afaiac but my job requires a new car and the company are paying me handsomely to provide one. I buy a cheap(ish) new motor, pay some finance for 2 years, keep it for 5/7 and pocket the rest for some exotic low depreciating classic/trackday car!

Paying interest and how much, is a matter of personal choice and circumstance. If you can get a better return from tax free savings (i.e. an ISA at 6.5%) against a personal loan at 5.9% then you do not lose any money in interest on the loan.

I have had a moan at the finance guy about not making it clear and told him that it's not competitive, he gave me a line about he's worked in a bank for blah years yadda yaddda

I'm pretty switched on to numbers and consumer affairs in general but not at anytime did he point the actual APR, just the 5%p.a. and as Fiat are advertising 5% APR I took that as the same. I can't believe I fell for it in the showroom but it wouldn't have got past my anally retentive personality for long!

The finance was never part of the deal so I have simply arranged a personal loan at 5.9%APR

jug said:

interest free my arse, it is always cheaper to get a bank loan. never buy a car on finance. if you get a bank loan you pay less interest and you can get a bigger discount on the rrp (or more extras thrown in).

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Speaking as an industry professional, let me just kick this into touch...

"Interest free" is total crap - agreed - in most cases. Somebody has to pay for it. There will be a subsidy - for example £750 - which the dealer pays the finance company. That's money you could have had off the price of the car.

If used properly, car finance can be an excellent product. The market is so competitive right now that excellent finance deals can be struck. I have often seen figures well below bank rates. In fact, genuine cash customers can get a lower rate on car finance than their savings rate, so they make money. Sinking your cash into a car is throwing your money away.

If you only want to keep a car for a set period - say three years - then buy the car on a PCP. That way, providing they use a guaranteed future value, you are protected against depreciation (the true cost of the car). This can potentially save you thousands of pounds.

Where the above poster is seriously missinformed is in the belief of "cash discount" or a better deal for cash. In the industry, new car customers paying cash are despised. Why? Because the dealer is targeted on finance as well as units, and the finance deal can earn him more than the chassis.

It is actually illegal to differentiate the price of goods for customers paying on finance and those paying using a credit agreement. Any retailer found to be doing so would be in very hot water.

So you are going to finance... then go to the bank and get a personal loan. Eh, no... bad idea! Providing you are funding less than £25k, a car finance agreement will be regulated, which gives you extra rights - and they are worth having. If you have a car on a finance agreement, look up halves and thirds. Great if you have negative equity. If things go tits up for you (and your circumstances MIGHT change in the future) your maximum loss is the car. With a personal loan... you owe that amount.

Cathal