MINI2 - MINI Forum - View Single Post - Finance

Martin F · Sep 14th, 2007, 09:31 AM

Quote: Originally Posted by MBmini (original)

i disagree!

you put down an affordable deposit and the repayments work out cheap because you're not financing the total value of the car - hence this makes a £20k car affordable to a larger proportion of consumers.

Not true. The way Select, or any other PCP scheme works from the finance providers viewpoint is that the finance provider buys the car and then charges a monthly amount to cover interest on the amount financed and a further sum to reduce the capital outstanding to the amount of the balloon payment at the end of the finance period.

And to reflect this the APR is calculated on the amount outstanding, including the balloon payment, over the term.

The advantage to the buyer is that you can effectively pay as you drive and to the dealer it is that you may not want to make the balloon payment so hopefully will buy another car at the end of the PCP period.

The best way of saving is to get a low APR. Sometimes a loan over a longer period than the PCP can offer better value as well.

Sep 14th, 2007, 09:31 AM	#12
Martin F Making it add up Join Date: Apr 2006 Location: Sussex Local Time: 03:42 PM Posts: 644 Offline	Quote: Originally Posted by MBmini (original) i disagree! you put down an affordable deposit and the repayments work out cheap because you're not financing the total value of the car - hence this makes a £20k car affordable to a larger proportion of consumers. Not true. The way Select, or any other PCP scheme works from the finance providers viewpoint is that the finance provider buys the car and then charges a monthly amount to cover interest on the amount financed and a further sum to reduce the capital outstanding to the amount of the balloon payment at the end of the finance period. And to reflect this the APR is calculated on the amount outstanding, including the balloon payment, over the term. The advantage to the buyer is that you can effectively pay as you drive and to the dealer it is that you may not want to make the balloon payment so hopefully will buy another car at the end of the PCP period. The best way of saving is to get a low APR. Sometimes a loan over a longer period than the PCP can offer better value as well.