PCP : understanding APR!

[silentbrown]

I'm buying a new car, and planning to take out PCP purely for the finance contribution. I intend to pay off the PCP fully after 6 months. (yes, I know I could just cancel within 14 days, but...)

The PCP figures I've got are be based on minimising interest during the 6 month period - so largest possible deposit (50%), shortest payment term (18 month) and smallest possible GFV (so that the 6 repayments reduce the outstanding capital as fast as possible).

First, does this make sense, or am I missing something?

Second, the PCP quote shows a "Representative APR" of 7.9%, then another figure for "Rate of Interest". What's the difference between the two rates?

[TwigtheWonderkid]

Borrow £100 for a year on 1 Jan at 20%, pay back nothing until 31 December when you pay £120 in 1 lump sum, the interest rate and apr are both 20%.

Borrow £100 for a year on Jan 1 at 20%, pay back £10/month every month for a year, interest rate is 20% but apr is much higher.

On both loans you borrowed £100 and paid back £120, but the first loan is obviously a much better deal.

[CYMR0]

On the basis that you want to keep the finance for six months, you're doing it exactly right.

If you have secondary finance in place (i.e., you've already got a loan for the full amount) I'd pay it off sooner rather than later.