Mini Finance Formulas For PCP!??

[##~James~##]

Hi Guys,

I got a quote for finance from Scotthall Mini for a MC just incase i dont pay in cash. When i got home i realised it is not simply the finance amount plus interest divided by the bumber of months. Does anyone kow the formula or give me some insight into how the finance quotes are calculated. It must be do-able because all they do is punch numbers into the computer and it calculates the finance.

Any help would be greatly appreciated!

Thanks

[supa-dupa-cooper]

This is taken from the Parkers guide, for when i was attempting to work out my finance. I think its for working out straight finance though (the whole amount) rather than the one with the lump sum at the end?


1) Flat rate of interest x Number of years loan will run (=)
(i.e 7.7%APR = 3.65%)

2) Answer of (1) x Loan amount (=)

3) Answer of (2) / 100 (= Total interest to pay)

4) Answer of (3) + Loan amount (= Total amount to pay)

5) Answer of (4) / Number of months (= Monthly payment)


Personally i leave it to someone else to work out - i dont do numbers

[picard]

u have a future value to consider also called balloon payment or final payment

basically its

cost of car -
deposit +
interest on total borrowed -
final payment
divide by months

example 36 months

16000 car less 2000 deposit

leaves 14000
interest on this of 2000

gives 16000

minus 7000 final payment

gives 9000

divide by 36

gives 250 per month

have i confused you more now

[supa-dupa-cooper]

Quote: Originally Posted by picard (original)

have i confused you more now

Umm..


(I used to work in a bank you know)

[Scrogg]

The final payment (Guaranteed Minimum Future Value) is set by BMW Financial Services, and is based on a percentage of the value of an equivalent car to the one you are buying at the age it will be at the end of the agreement.

Interest is charged equally on the remaining balance.

For example (using figures that are easy to work out):

Purchase Price: £15,000.00
GMFV: £5,000.00
Amount Borrowed; £10,000.00

Assuming an interest rate of 5% per annum (equates to approximately 9.9% APR before I start getting abuse from people about using flat-rates!) over 3 years the monthly payments should be £319.44.

However, interest is also charged, at a different rate, on the GMFV which is added to the monthly payment, which is why it is almost impossible to work out with a calculator.

Hope this makes sense, as I've never been great at explaining it to people that don't know how it works?

[##~James~##]

ye i knew it was complicated. simple (flat rate interest) is easy to work out. but im not sure how it works with GMFV.

when a friend got a quote for a used mini it was £11459 for the car. they gave him £2500 part ex and £1500 cash deposit = £7459

they said the GMFV was about £4759 or something. = £2700 for finance?

the monthly repayments over 40 months worked out at about £145 p/m.

this doesnt seem right somehow because 40 x 145 = £5800 which seems like alot when you consider the amount left to finance was only £2700?

am i missing something?

[Scrogg]

Quote: Originally Posted by ##~James~## (original)

am i missing something?

Probably not.

Dealers are notoriously greedy when it comes to finance, which is why it always pays to shop around.

It's amazing how they suddenly have a "special offer rate made available to them" when you tell them you can borrow the money cheaper elsewhere!

[##~James~##]

im just curious how it is worked out - seems like a bit of a con to me. to finance £2700 you have to pay £5800 in total?? It not so much the interest thats the problem, i just dont see how it is worked out.

[Scrogg]

The interest is the problem. The reason the payments are so high is because the dealer is using the highest band available to them so that they earn as much commission as possible.

If they lowered the rate the payments would go down, but all the other numbers would stay the same. Simple really!

[##~James~##]

so what is a typical rate of interest? they told me that they use about 8%?

[Scrogg]

Which proves my point rather well, don't you think?

8% Flat is huge compared to what is available elsewhere, even with the current base rate being 5.25%.

Sadly, 8% is about typical for a dealer, as they are middle-men for BMW Financial Services and are looking to earn as much commission as possible.

Do a Google UK Search for 'PCP Quotes' and you'll find loads of other lenders that will do the same type of finance much cheaper.

[mcs_sam]

You need to bear in mind that the less you borrow the higher the apr will be because on a lower value, to make it worth their while they need to charge a higher percentage to earn the same commision.