PCP interest rates: on the rise?
Discussion
I've just got back from my local VW dealer. My existing 3 year deal is coming to an end. This was agreed in March 2011 at 7.6% APR. Since then the Bank of England rate has stayed firm at 0.5%. However, today's VW offers for the replacement cars I may be interested in are at 10.1% and 10.4% respectively. Is this to be expected now, or are they taking the Michael?
The deals on new cars are taking them to the price of year old used ones at Audi and BMW etc. and the rates on new are around 4.9%, even some 0% deals as said above.
You can get a bank loan from Barclays at for 6%, so yeah, Audi are taking the piss at over 10%.
What car and age (or monthly price) do you want?
You can get a bank loan from Barclays at for 6%, so yeah, Audi are taking the piss at over 10%.
What car and age (or monthly price) do you want?
LotusOmega375D said:
I've just got back from my local VW dealer. My existing 3 year deal is coming to an end. This was agreed in March 2011 at 7.6% APR. Since then the Bank of England rate has stayed firm at 0.5%. However, today's VW offers for the replacement cars I may be interested in are at 10.1% and 10.4% respectively. Is this to be expected now, or are they taking the Michael?
Or it could be that the rates need to rise to account for the additional risk now that more and more people think they can "afford" a new car on finance, more people are expecting a larger discount on purchase price, second hand values are high and dealers need to make some money somewhere in the process.Lots of different factors to take into account - are you borrowing less money on this new car than the previous one? If so the document fees (if any) will make up a higher proportion of the total interest charges which will result in a higher APR. Shorter term this time? Same formula applies.
Additionally the rates will vary depending on which model you're buying as VW will have different support on different models - more on Passat than on Golf, more on Golf than on Up, etc.
The 0% deals that you see with some dealers are nearly always in lieu of discounts on cars - in most cases you'll find a better overall deal taking a 'normal' APR on a discounted car.
Additionally the rates will vary depending on which model you're buying as VW will have different support on different models - more on Passat than on Golf, more on Golf than on Up, etc.
The 0% deals that you see with some dealers are nearly always in lieu of discounts on cars - in most cases you'll find a better overall deal taking a 'normal' APR on a discounted car.
LotusOmega375D said:
I've just got back from my local VW dealer. My existing 3 year deal is coming to an end. This was agreed in March 2011 at 7.6% APR. Since then the Bank of England rate has stayed firm at 0.5%. However, today's VW offers for the replacement cars I may be interested in are at 10.1% and 10.4% respectively. Is this to be expected now, or are they taking the Michael?
A tiny bit of taking liberties I think.But you've got to consider that interest rates aren't based on what's happening now but what is expected to happen in the future.
In 2011 the recovery was still rolling on at a slow pace. 0.5% looked stable and you needed to give a good deal to encourage people to spend. Now the economy is getting it's act together, interest rates look set to rise plus people have more disposable income again.
LotusOmega375D said:
I've just got back from my local VW dealer. My existing 3 year deal is coming to an end. This was agreed in March 2011 at 7.6% APR. Since then the Bank of England rate has stayed firm at 0.5%. However, today's VW offers for the replacement cars I may be interested in are at 10.1% and 10.4% respectively. Is this to be expected now, or are they taking the Michael?
They may well have a different attitude to risk now.But the biggest factor is probably that your circumstances are different now.
You are now considered a greater risk so you pay a higher interest rate.
do you really think the bank of england base rate has anything to do with the cost of borrowing anything which is 15x or 25x time as high?
base rate effects things like mortgages and commercial lending and is by no means the only factor.
The cost of consumer credit has been as cheap or cheaper than it is now, when base rate has been 10x+ what it is today
base rate effects things like mortgages and commercial lending and is by no means the only factor.
The cost of consumer credit has been as cheap or cheaper than it is now, when base rate has been 10x+ what it is today
ging84 said:
do you really think the bank of england base rate has anything to do with the cost of borrowing anything which is 15x or 25x time as high?
base rate effects things like mortgages and commercial lending and is by no means the only factor.
The cost of consumer credit has been as cheap or cheaper than it is now, when base rate has been 10x+ what it is today
Exactly, things like PCP, credit cards etc are in some part based on the lenders experience of default, loads of people don't pay their credit card bills, so expect to pay higher interest if you want to borrow (or of course pay it off in full every month and don't get charged interest). base rate effects things like mortgages and commercial lending and is by no means the only factor.
The cost of consumer credit has been as cheap or cheaper than it is now, when base rate has been 10x+ what it is today
The 0% offered by others is a sales incentive; they are effectively just reducing the price to increase the number of sales.
People moaning about paying 15% on a credit card when base rate is 0.5% obviously don't understand what base rate is.
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