Car Finance vs Bank Loans

[halo34]

Just a quick question regards HP vs bank loans.

I know that when I took out bank loans before interest was always calculated monthly - so using online banking you always had a fair idea what the settlement figures would look like (plus interest from that month).

Now is that any different to taking out HP on a car?

I dont normally deal with finance direct through garages so excuse me being thick - but they dont add interest and then you end up paying that off first then the capital do they?

[AndrewW-G]

Car finance is normally the loan value + interest over the term of the loan, with your payment being that total divided by the number of payments to be made.

When you pay it off early, they recalculate the interest portion on the outstanding amount of the loan

[halo34]

AndrewW-G said:

Car finance is normally the loan value + interest over the term of the loan, with your payment being that total divided by the number of payments to be made.

When you pay it off early, they recalculate the interest portion on the outstanding amount of the loan

Ok so if its flat rate - do they rebate the remaining portion of the interest across the number of months left?

I am just trying to get my head round how I track what is outstanding on the car vs its value as I dont like not knowing where I stand.

Last bank loan was brilliant, log into online banking and there is your outstanding amount.

[Sticks.]

Sounds like you've answered your own question there. If you've used a syatem and yu were happy with it, why change? I was naive enough to think flat rate = apr.

[halo34]

Sticks. said:

Sounds like you've answered your own question there. If you've used a syatem and yu were happy with it, why change? I was naive enough to think flat rate = apr.

Getting a better flat rate quote via Garage than the equivalent APR from the bank - works out a fair bit cheaper over the term.

[Sticks.]

Sounds like you're looking into it more closely than I did. Just as well, I was specifically told by BMW finance rep that there was no penalty for early payment. There was. Note to self, check everything with finance co.

[halo34]

I have a list of questions ready

No point signing something if you aren't 100% sure what you are getting into - hence my caution in switching funding sources, its the hidden costs that catch you out rather than the headline figures.

The garage are taking their time dealing with it though so getting impatient.

[Sticks.]

If only more prepared like you - myself included Good luck with your purchase.

[LuS1fer]

The main problem with finance is you have to pay it off before you sell. With a personal loan, it's not tied to the car so you can pay it off after sale.

[halo34]

LuS1fer said:

The main problem with finance is you have to pay it off before you sell. With a personal loan, it's not tied to the car so you can pay it off after sale.

Yeah this is one of my other qualms, I like the flexibility of being able to cut loose quickly as well.

Ho hum maybe back to drawing board.

Besides garage is doing my head in, deposit was down last week and still they havent confirmed pick up etc.

[NDT]

I thought car finance was normally a worse APR than a typical bank loan?
which seems strange as it's secured on an asset?

[robsti]

AndrewW-G said:

Car finance is normally the loan value + interest over the term of the loan, with your payment being that total divided by the number of payments to be made.

When you pay it off early, they recalculate the interest portion on the outstanding amount of the loan

Off topic Andrew but did you get your GTI and is it any good?

[halo34]

NDT said:

I thought car finance was normally a worse APR than a typical bank loan?
which seems strange as it's secured on an asset?

You have to be careful and try and work out total cost over the term and not assume a flat rate is the same as an APR.

Couple of sites let you do a comparison.

I went to bank first then back to garage and they match, when I first walked in rate was much higher.

But yes in essence the HP is more secure since they have an asset - but I would imagine there is still risk involved for the finance company hence the rates are similar.