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Martin F · Feb 1st, 2008, 12:15 PM

Quote: Originally Posted by thebadun (original)

2) Having a small deposit wasn't a problem, and in many ways reduced initial capital outlay into a depretiating asset. Related to above, a small deposit also makes the finance cheaper, because of the deferred amount, so say the car was £10k, finance over 48 months would mean a £10k loan from the bank, because of the GMFV of, say £3k, the Select finance means that you are only financing £7k, albeit at a higher rate.

This is another common misunderstanding. The cost of the finance is determined by the amount borrowed. The GMFV is subject to interest just as the rest of the amount financed is. The size of the GMFV will affect the amount charged for interest because the rate at which capital is repaid changes. Again it is best to focus on the APR.

Feb 1st, 2008, 12:15 PM	#11
Martin F Making it add up Join Date: Apr 2006 Location: Sussex Local Time: 02:31 PM Posts: 634 Offline	Quote: Originally Posted by thebadun (original) 2) Having a small deposit wasn't a problem, and in many ways reduced initial capital outlay into a depretiating asset. Related to above, a small deposit also makes the finance cheaper, because of the deferred amount, so say the car was £10k, finance over 48 months would mean a £10k loan from the bank, because of the GMFV of, say £3k, the Select finance means that you are only financing £7k, albeit at a higher rate. This is another common misunderstanding. The cost of the finance is determined by the amount borrowed. The GMFV is subject to interest just as the rest of the amount financed is. The size of the GMFV will affect the amount charged for interest because the rate at which capital is repaid changes. Again it is best to focus on the APR.