car finance question

DooMeR

DooMeR

DooMeR

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Joined
8 Dec 2008
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East yorkshire near hull
This is just a quick question really for people who understand it.

I never really bought anything on finance but my dad dragged me into it. He has bought a car on finance and I feel he has been ripped off.

I can't remember the exact figures.

He is buying a car on hire purchase agreement

Basicly hes buying a 2nd hand ford for 9200 pounds, they are taking his old car as a deposit and part ex.

Overall hes buying the car for around 7200 pounds roughly.

I think the amount of interest hes paying is very steep. I am just wondering how much roughly he should be paying interest wise in terms of a figure or % I just want to see how close it is to the figure he's paying :s
 
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Is it a base model 2001 Ford KA or a 2014 Mondeo Titanium X? Honestly, how is anyone supposed to help give you an answer? :p
 
hehes sorry is a 2012 ford focus 1.6 or 1.8 (pretty sure 1.6) eco boost diesel around 20 000 miles its a nice car and in good shape and he's happy with it. Pretty sure its just the standard model no bells and whistles apart from what comes as standard

I just worked out though hes paying roughly 33% interest on it. That seems high is it normal to pay that much ?

Oh and he got the payments spread over 64 months :s
 
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Typically the best rate you will get at the moment will be around 3.5% per annum, with a middle if the road rate of say 8% for a not so hot credit application.

The total % interest paid will depend on the term

I'm assuming you've worked out 33% total interest over the term, so while not directly comparable to Apr it does indeed sound horrendous. Unless the loan is over about 20 years the rate must be in the region of 13-15% at a guess which is typical of a credit card purchase rate or someone with fairly significant credit problems, who tbh probably shouldn't be applying for finance at the moment.
 
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vanandjuanunited said:
If he is happy - let him be. His money - his choice. Too late to do anything now surely
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Well he still has time to get out of it and he asked me for help i wasn't sure how these things worked people on here are normally smart on such things. He will be the last car he gets before he retires so it be nice to know its right it be nice to know he got at least a decent deal i guess :P
 
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DooMeR said:
I just worked out though hes paying roughly 33% interest on it. That seems high is it normal to pay that much ?

Oh and he got the payments spread over 64 months :s
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64 months. So its one of these 5 year deals with "nothing to pay until April/May" ??

Whats the amount of finance he took out?
Whats the monthly payment?
 
10% APR is pretty standard sort of stuff for a dealer financed second hand car. Check the paperwork to see if there are any penalties for settling early. £7200 isn't a "huge" amount of money to finance.

Cheapest way to pay it, assuming he has the credit history for it, is to get a 0% purchases credit card for as long a term as possible, and pay off the loan with that, and make the same payments he currently makes. Then, when the 0% runs out, switch it to a 0% balance transfer card for their relatively small fee (usually 2.75 - 3%).

The next cheapest way is with a regular bank loan, which should come in around 3-4% APR. This is easier to do overall, but is still significantly enough more expensive than the credit card route to be worthwhile seeing if it works for him.
 
rodenal said:
Typically the best rate you will get at the moment will be around 3.5% per annum, with a middle if the road rate of say 8% for a not so hot credit application.

The total % interest paid will depend on the term

I'm assuming you've worked out 33% total interest over the term, so while not directly comparable to Apr it does indeed sound horrendous. Unless the loan is over about 20 years the rate must be in the region of 13-15% at a guess which is typical of a credit card purchase rate or someone with fairly significant credit problems, who tbh probably shouldn't be applying for finance at the moment.
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I am not a maths whiz but i got hold of the paper work and i worked it out hes around paying 10% per year on the amount borrowed and cause he borrowed it over 5 years its worked out at fair bit of interest over the 5 years. It works out to 33% overall.


Still seems a little high to me but his monthly repayments are quite low so overall i think hes happy with the deal he got.

It just can be quite confusing all jargon you get fed and they don't really make it simple for people to understand at times.

I just still get the feeling 33% overall interest is high i don't think is credit rating is that bad for it to warrant it being that high.
 
I never understand why people go for Finance over bank loan? The interest rates are significantly better and you don't have these issues of being ripped off! Plus, at a lower rate he could get a lower term, which means higher monthly payments for the loan equivalent to what he is able to afford on Finance, but the time to pay it off is less and also means interest is less.
 
xs2man said:
10% APR is pretty standard sort of stuff for a dealer financed second hand car. Check the paperwork to see if there are any penalties for settling early. £7200 isn't a "huge" amount of money to finance.

Cheapest way to pay it, assuming he has the credit history for it, is to get a 0% purchases credit card for as long a term as possible, and pay off the loan with that, and make the same payments he currently makes. Then, when the 0% runs out, switch it to a 0% balance transfer card for their relatively small fee (usually 2.75 - 3%).

The next cheapest way is with a regular bank loan, which should come in around 3-4% APR. This is easier to do overall, but is still significantly enough more expensive than the credit card route to be worthwhile seeing if it works for him.
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Yeah i told him that would be the best way to do it :) And something we looked into.

He can only borrow 4500 from a bank though. And we have looked into credit cards hes been approved for a 0% finance card over 2 years but i am not sure how much he can borrow on that.

He has so many days to back out the agreement and a extra 20 days to pay off the finance with out any interest charge.
 
He might not have many options then if the bank is only going to give him £4500 and he needs £7200.

If his credit is bad enough that he can't get the full £7200 from a traditional loan, the. 10% APR may well be as good as he'll get.
 
craig_t said:
I never understand why people go for Finance over bank loan? The interest rates are significantly better and you don't have these issues of being ripped off! Plus, at a lower rate he could get a lower term, which means higher monthly payments for the loan equivalent to what he is able to afford on Finance, but the time to pay it off is less and also means interest is less.
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Its a long story :P He tried to go for a bank loan first.

First time they refused him cause he had outstanding finance on his current car.... which he then paid off.

Once he paid it off they then told him he could only borrow 4500 which wasn't enough.
 
The £4.5k Max sounds a bit odd how has that figure been derived? Typically you will either be accepted at the advertised rate, offered a higher rate or just rejected - they wouldn't normally give a maximum loan?

Check the limit on the card and go from there, I wouldn't personally recommend splitting the loan over two different vehicles as it's easy to forget/ignore one of them but it is always an option.

Another way to make the annual rate sting a bit less is to significantly overpay and ask them to reduce the duration each time
 
Sounds like he's got bad credit file, so the dealer has found finance for him but at a very high interest.

So with that being the case, what you have put seems 'reasonable' - If you feel that strongly about it, cant you take a loan for him?
 
Acme said:
Is it a base model 2001 Ford KA or a 2014 Mondeo Titanium X? Honestly, how is anyone supposed to help give you an answer? :p
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How does the spec of the car affect what a reasonable HP interest rate would be? It's a 9 grand car with 7 grand finance, he just asked what a sensible APR would be...

Like others said, you could finance that amount with a bank loan for 3.something but I'd expect a car dealer to be between that an 10% APR. 10 is a pretty poor rate, but any more than that and he's definitely being ripped off. I'd personally prefer to see it closer to the bank rates but that rarely happens with dealer finance - except for subsidised deals
 
Thanks for the advice everyone making interesting reading.

I honestly don't have that sort of cash or I would.

I to am unsure why he would have a bad credit file. The only thing i can think of is his age counting against him and the fact he has still has mortgage.

But I know for a fact he's never missed a payment or any other sort of payment for a long time and he plans to have the car mostly paid off by the summer. He is a farm worker and earns decent money in the summer.
 
I'd agree, if his bank will only offer him 4500 then maybe his credit rating is too low and the high rate is the best someone would offer. It's like Wonga, they'll give anyone money but rip them off doing it!

Then again, you say it is the last car before he retires, how old is he? Does he have a decent income? Are his outgoings now nearly his incoming?
 
Hes 55 so the old dog got a few years left yet so maybe won't be his last car but could be if he looks after it.
 
DooMeR said:
Hes 55 so the old dog got a few years left yet so maybe won't be his last car but could be if he looks after it.
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Seems strange that they'll only offer 4500 then, there must be something else to it. Income, previous debt, etc.

Tell him to have a look on Noddle, it's like experian but free. It will give him an answer as to whether something is holding him back.
 
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