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Can anyone calculate the APR on this loan?

Hi,

Just had a quote from a car dealer for the following but i'm finding it a bit tricky calculating the APR on this loan. Was told 8% by the dealer but is this correct?

Cash Price 33,083.00 Less Deposit 5,000.00 Balance of Cash/Amount of Credit 28,083.00 Add Interest Charges 7,407.70 Admin Fee payable with 1st month rental 125.00 Purchase Fee Payable with Final Rental 50.00 Total Charge for Credit 7,582.70 Balance Payable 35,665.70 Total Amount Payable 40,665.70

Balance Payable is by 35 Monthly Rentals 527.43 Followed By Optional Final Payment of 17,030.65 and Purchase Feee of 50.00 Total 17,080.65

Thanks for any help on this one..... Steve.

Reply to
Steve Winter
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The £50 purchase fee seems to be listed twice.

Also the figures don't add up:

35 x £527.43 is £18,460.05, which deducted from £35,665.70 leaves £17,205.65, which is £125 more than the stated £17,080.65.

Anyway, the cash flow appears to be:

Month 0: -28083.00 Month 1: +652.43 Month 2: +527.43 ... Month 34: +527.43 Month 35: +577.43 Month 36: +17080.65

If the APR is 8% you need to scale all those by multiplying by 1.08 raised to the power of minus the month number divided by 12. Then add them all up and the sum should be zero. It isn't. So you keep fiddling with the APR until it is. I make it about 11.8%.

Reply to
Ronald Raygun

Thanks very much for that Ronald. I'm now being told it's a 5% flat rate interest charge which again I suspect isn't correct.... :(

Steve.

Reply to
Steve Winter

Well, we can test that too. For simplicity, let's approximate, and think of it as borrowing £17k for the whole 3 years, and the other £11k on a decreasing basis. At 5%pa flat, the charge for interest should be

15% of £17k plus 15% of £5.5k. That should be £3375. So again it looks more like the flat rate should be about 11.2%.

I think it's time to threaten to report them to the FSA or FOS or whatever the appropriate watchdog is called this year.

Reply to
Ronald Raygun

"Ronald Raygun" wrote

Ronald, are you forgetting the definition of "flat rate" ? :-(

Just borrowing 11K, at 5% flat (over 3 years), would cost 15% of **11K** in interest - ie 1.65K...

Reply to
Tim

This bothered me in the earlier calculation as well Ronald, surely power of minus the running month number divided by 36?

"If the APR is 8% you need to scale all those by multiplying by 1.08 raised to the power of minus the month number divided by 12".

Reply to
Troy Steadman

Yes. Oops. Does that also mean the £17k would be charged at 30%?

No, I think I got that one right. Tim hasn't criticised it, so I must have. :-)

Reply to
Ronald Raygun

"Ronald Raygun" wrote

Dunno for sure - but I'd have thought 15% again (no real reason to double it?).

"Ronald Raygun" wrote

Agreed.

"Ronald Raygun" wrote

;-)

Reply to
Tim

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