Car Finance
Car Finance
Just been to see a car as wanting to trade in the wifes car. The PX value was quite low (£750) but they did have a minimum part ex value (£1300) if we took out finance for the deal.
We have a budget of £4k plus hers for trade in so obviously the £1300 against the car is a much better deal. The salesman reckons that if we take out the finance and make the first months payment (~£150) then we are legally entitled to settle the remainder of the finance without being charged interest on it and without an early repayment charge. So, we would end up only paying a small amount of interest on the first months payment, and then use our cash to settle the finance and that way end up being better off by £1300-£750=£550 and the garage still gets their commission for initially taking out the finance.
Anyone know if this is correct?
Thanks
We have a budget of £4k plus hers for trade in so obviously the £1300 against the car is a much better deal. The salesman reckons that if we take out the finance and make the first months payment (~£150) then we are legally entitled to settle the remainder of the finance without being charged interest on it and without an early repayment charge. So, we would end up only paying a small amount of interest on the first months payment, and then use our cash to settle the finance and that way end up being better off by £1300-£750=£550 and the garage still gets their commission for initially taking out the finance.
Anyone know if this is correct?
Thanks
Just found this which may back it up. Hopefully these EU rules mean the bit in bold reduces the amount of early repayment charges I could be given by the lender.
RULES TO REMEMBER
If you plan to take on a loan, make sure you're up to scratch on the laws.
EU rules mean early part-repayments are allowed
Since 1 February 2011, partial overpayments are allowed on loans taken after this date.
Banks may charge you, but this is limited to a maximum of 1 per cent of the amount repaid (if the loan is for more than a year) or 0.5 per cent (if under a year).
Loan providers must allow you to pay off your loan in an early repayment. This is subject to a penalty which is usually one or two months interest.
http://www.thisismoney.co.uk/money/c...#ixzz30wGe4AAP
If you plan to take on a loan, make sure you're up to scratch on the laws.
EU rules mean early part-repayments are allowed
Since 1 February 2011, partial overpayments are allowed on loans taken after this date.
Banks may charge you, but this is limited to a maximum of 1 per cent of the amount repaid (if the loan is for more than a year) or 0.5 per cent (if under a year).
Loan providers must allow you to pay off your loan in an early repayment. This is subject to a penalty which is usually one or two months interest.
http://www.thisismoney.co.uk/money/c...#ixzz30wGe4AAP
It says 'usually one or two months interest'. That doesn't mean its set in stone for every finance company. You need to speak directly to the finance company you'll be using.
But remember, if it looks to good to be true it most often is. That £550 has got to be paid by somebody and if you think the finance company or the dealer will then you're very much misstaken.
But remember, if it looks to good to be true it most often is. That £550 has got to be paid by somebody and if you think the finance company or the dealer will then you're very much misstaken.
Last edited by MattyB1983; May 6, 2014 at 01:54 PM.
Agreed if you get it in writing.
In the past when I have taken such deals, the finance company have charged an acceptance fee £125-£250. And on early settlement (less than 3 months ) have charged 31 days to 6 months interest.
In the past when I have taken such deals, the finance company have charged an acceptance fee £125-£250. And on early settlement (less than 3 months ) have charged 31 days to 6 months interest.
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Scooby Regular
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From: 535D M-Sport Touring
Also make absolutely sure it's not a flat rate interest deal where they add all the interest to the loan amount at the beginning and then your monthly payments are fixed for the duration. I'm sure they'd gladly welcome you paying it back early as it will make no difference to them.
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