Was in the car showroom today asking why the apr was 9.9% on peugeot finance and the saleman was feeding me some chaff about how it's all calculated differently with pcp because of the balloon payment and stuff. He said it is equivelent to a banks loan rate of 7.5%. Is there any truth in this?
Seeing that most banks and credit card issuers can't even come up with a standard way of calculating APR then my guess is that the salesman was talking thru' his arse and was just trying to make out the deal was worth it. At the end of the day, what you should look at is the amount you borrow and then look at the of interest plus any other charges you might pay (a lot of car finance places charge you a set up fee and even a loan completion fee - huh?) you pay over the term of the loan and then ask yourself is it worth it - if you think it is and you can afford it - then go for it. If however, you think you're being ripped off then go elsewhere. It's not very scientific, but usually works for me.
Any rate, I'd go for a personal loan rather than a finance deal with the car dealer. Most times they'll work out more expensive.
In message , Jacob Rosse writes
No truth what so ever.
The 'balloon' payment makes no difference at all to the APR calc. The reason it looks more expensive is that most PCP deals involve extra 'fees' at the start and at the balloon date which banks dont charge.
He isnt lying, though, he just doesnt know any better, he is just doing what his sales manager taught him. Take pity on him, but don't believe him.
Knowledge of finance deals is an important part of a car salesman's skill set, so if he knows so little about car finance I would seriously doubt anything else he has told you about the car.
"John" wrote
I think that's normally a "purchase fee" (little though it is for the sakes of buying the car at the end!) - don't forget that on "hire purchase" you may be only *hiring* the car during the term of the contract!
Sounds like something from the blunt end of a bull. Apr should be calculated in pretty much the same way by everyone and it is the rate that every lender must declare It is the best one to compare. The calculation can be muddled by having low interest periods, penalties and other odd charges but, in an imperfect world, it is the definitely best rate to compare.
Other rates, like the "flat rate" and pcp (never heard of that before) can be calculated in different ways. Lenders have even been known to invent an acronym for a rate calculation that they invent themselves.
PCP = Personal Contract Purchase.
I am much wiser now.
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