[tisme]

Remember when you get finance through a stealer, you are getting no discount off the car.

www.drivethedeal.com were offering 17% off beemers last year, but I am not sure what the discount is this year.

I think the best option is to haggle for a cash discount and arrange the finance separately.

[AlanQS]

I have to disagree. Years ago, dealers got away with charging list because they were doing you the favour of financing you. But it has always been the case that not only do they get all their cash - taking no personal risk at all, but they get a kick-back for arranging the loan.

Any discount available on the car is available no matter how the finance is arranged. Sadly, it looks like the discount has been reduced by BMW so some of last year's decent prices may be gone.

[RYANBOZ7]

Don't go through Bmw if you want the best rate if you're purchasing the vehicle.Go through www.penfed.org.Someone on here posted that site a few weeks ago and I went online and they gave me 4.99 for 72mos! BmwUsa is only 4.9 for 60 mos.You don't have to be a member of the military to join penfed,they report to the credit bureaus,and if you aren't military,you just have to pay $25.00 and it gets put into your own account.

[SnAzBaZ]

Originally Posted by RYANBOZ7

Don't go through Bmw if you want the best rate if you're purchasing the vehicle.Go through www.penfed.org.Someone on here posted that site a few weeks ago and I went online and they gave me 4.99 for 72mos! BmwUsa is only 4.9 for 60 mos.You don't have to be a member of the military to join penfed,they report to the credit bureaus,and if you aren't military,you just have to pay $25.00 and it gets put into your own account.

This is the UK forum remember :-)

[NFS]

Originally Posted by tisme

Remember when you get finance through a stealer, you are getting no discount off the car.

www.drivethedeal.com were offering 17% off beemers last year, but I am not sure what the discount is this year.

I think the best option is to haggle for a cash discount and arrange the finance separately.

The dealer makes money from selling you the finance. So in theory he can actually offer a better discount if you have finance from BMW.

This car loan calculator is really useful to break through the crap and understand what you are paying.

http://www.grosvenor-butterworth.co....alculatot.html

The most amazing thing about the dealers figures in this thread is that they don't state the APR. That alone is enough to raise a masssive red flag.

Obviously this is because the APR is too high, but hiding it is inexcuseable.

Originally Posted by gIzzE

Oh, and unless you plan on staying in the car for the full term, you need to look at a Balanced Lease Payments Scheme, all the PCP deals etc. from dealers will cripple you if you want/need out before the end of the term as they are all front loaded. So want out of that car at 2 years of a 4 year term and you will owe nearly the full amount you borrowed. Not nice!!

I think BMW will offer balanced payments also, but only with a variable interest rate.

My understanding of these schemes is that the payments are calculated to each include the same proportion of the total interest, based on an estimated rate.

There is then a recalculation at the end of the loan period, which may result in you paying more (if rates have increased) or receiving a refund (if they have decreased).

I don't think it's possible to have a balanced payment profile without also having a variable interest rate.

[yippym]

Originally Posted by gIzzE

Can I ask why you are putting £21,000 into a depreciating asset like that??

You would be better to put 10% in and get a higher balloon, drive it for 12 months and sell it again while they are still asking decent noney.

Go see an independant broker, Gareth at Bespoke will get you into the right finance package, and can probably source you a car cheaper too.

For all my cars in the past I have always gone for straight HP, it was simple and easy to understand. I can pay up to £25K deposit but on straight HP and the car costing £53K my monthly payments are not going to be near my target of £400/month, which is why I am looking at PCP. I am putting a large deposit to reduce the amount of borrowing and thus less interest charges???

Is there some kind of calculator or formula I would like to know the figures if I put 10% in and get a higher balloon, drive it for 12 months.

Oh and thanks for the number I shall give them a call next week.

[Art Man]

Originally Posted by gIzzE

Oh, and unless you plan on staying in the car for the full term, you need to look at a Balanced Lease Payments Scheme, all the PCP deals etc. from dealers will cripple you if you want/need out before the end of the term as they are all front loaded. So want out of that car at 2 years of a 4 year term and you will owe nearly the full amount you borrowed. Not nice!!

What do you mean by "front loaded"?

[NFS]

Originally Posted by yippym

Is there some kind of calculator or formula I would like to know the figures if I put 10% in and get a higher balloon, drive it for 12 months.

http://www.grosvenor-butterworth.co....alculatot.html

Originally Posted by Art Man

What do you mean by "front loaded"?

When they calculate their early settlement figures BMW require a greater amount of the total interest to be paid, than you would have if the interest payments were evenly split.

So after 1 year of a 4 year deal you will have physically paid 25% of the interest, but any settlement figure will be based on around 45%.

It's easier to understand as an early settlement penalty rather than front loaded interest.

[Art Man]

Originally Posted by needforspeed

http://www.grosvenor-butterworth.co....alculatot.html



When they calculate their early settlement figures BMW require a greater amount of the total interest to be paid, than you would have if the interest payments were evenly split.

So after 1 year of a 4 year deal you will have physically paid 25% of the interest, but any settlement figure will be based on around 45%.

It's easier to understand as an early settlement penalty rather than front loaded interest.

I thought that was meant, but I just wanted to make sure. But the method BMW use is the same as all financial institutions, in the calculation of an early settlement figure, namely interest is calculated on a monthly bases against the amount outstanding. So at the beginning of a loan, as the outstanding amount larger than at the end of a loan, the interest added to the account is going to be more than is added to the end. Therefore because the monthly payments are the same, a greater proportion of the repayment pays off the interest added to the loan at the beginning and less of the actual loan, whilst the end, a greater proportion is use to pay the actual loan and less to pay the interest added. This is why half way through a loan, more than half of the balance is outstanding.

[tisme]

...which is why it is best to put the car on the mortgage. Direct Line calculate interest daily (rather than annually as some thieving building societies do) so if you repay early, the APR stays the same with Direct Line.

[Art Man]

Originally Posted by tisme

...which is why it is best to put the car on the mortgage. Direct Line calculate interest daily (rather than annually as some thieving building societies do) so if you repay early, the APR stays the same with Direct Line.

Subject to any early repayment charges that might exist on some types of mortgage

[tisme]

Originally Posted by Art Man

Subject to any early repayment charges that might exist on some types of mortgage

Yep, quite correct, so I have made a little spreadsheet that will cater for payments by month, set up fees and cancellation charges for when I start doing my comparisons in 3-4 months time.

[NFS]

Originally Posted by Art Man

I thought that was meant, but I just wanted to make sure. But the method BMW use is the same as all financial institutions, in the calculation of an early settlement figure, namely interest is calculated on a monthly bases against the amount outstanding. So at the beginning of a loan, as the outstanding amount larger than at the end of a loan, the interest added to the account is going to be more than is added to the end. Therefore because the monthly payments are the same, a greater proportion of the repayment pays off the interest added to the loan at the beginning and less of the actual loan, whilst the end, a greater proportion is use to pay the actual loan and less to pay the interest added. This is why half way through a loan, more than half of the balance is outstanding.

I agree. BMW finance is no more 'front loaded' than any other finance deal.

The interest is charged on the amount owed, since the debt is bigger at the start of the loan and the payments are constant, the early payments have a higher proportion of interest to capital.

[gIzzE]

No, you have got that wrong, just about the only agreement with a balloon where interest is calculated on a daily basis (it is actually done each month) is a Balanced Lease Payments Plan.

Fixed interest rate will be higher (as much as 1% apr) but you know where you stand each month as it won't change, however if you settle early you have to pay 2 months interest (this is to cover any shortfall there may have been due to rate changes, so both you and the lender are taking a gamble on this.

Variable rate you just settle early with no penalty. If the interest rate goes up or down your term changes, so if you get a drop of 2% over the 2 years you may only have to pay for 46/47 months, if it goes up you may have to up the term to 49/50 months.
However, you save a fair bit in the first place on the rate, so it would have to be a major hike in interest to make the fixed rate appeal.



PCP deals etc. are all flat rate, by their very nature these are front loaded.
A flat rate is exactly what it says, a percentage of the money loaned, in this case £32500, it then added on the front, so if it is say 6% flat (which is less than BMW have offered in the initial deal) it would be 6% of the 32500 x 4 years, it sounds less than apr but the apr equivalent (and equivalent is the important word) would be around 12%.
With APR the interest is calculated on the remaining loan, with flat rate it is a flat rate of the initial amount calculated annually and multiplied by the term.
So it would be £1950 (6% of £32500) x 4 years, bringing the total borrowed to £40300. This becomes what you owe, as you can see the first couple of years is just paying off the interest, the last couple is purely paying off capital, so you really don't want to get out half way through one of these deals.

On loans under £25k when you have paid half off you can throw the keys back and walk away, dealers hate it but you can do it, but not on agreements over £25k.



My balanced lease payments give me a statement each month, it is broken down like this......

Month 1
£30000 borrowed and owing.
£500 received
£100 interest

Month 2
£29600 owing
£500 received
£99 interest

Month 3
£29199 owing
£500 received
£98 interest

Settlement £29199 - £500 + £98 interest = £28797 to clear

etc. etc.


A pcp statement would read after 3 months

£300000 borrowed Interest at 6% flat over 48 months £7200
£37200 owed less £500 x 3 months paid = £35700 to clear.

Now some finance houses have a rebate system where you get a discount based on the time remaining, it may be £75% of charges in year one, or 25%, you need to ask this as it can make a huge difference.

I got caught with a PCP on a Merc ML, only one I did, the car was £35k, I borrowed £31k and needed to get out after 3 months, I had to pay £39k to get out! Be careful.

[NFS]

Originally Posted by gIzzE

No, you have got that wrong, just about the only agreement with a balloon where interest is calculated on a daily basis (it is actually done each month) is a Balanced Lease Payments Plan.

Gizze - can you actually get a balanced payment deal with a fixed rate and exit charges of just 1 or 2 months interest?

Originally Posted by gIzzE

A pcp statement would read after 3 months

£300000 borrowed Interest at 6% flat over 48 months £7200
£37200 owed less £500 x 3 months paid = £35700 to clear.

Now some finance houses have a rebate system where you get a discount based on the time remaining, it may be £75% of charges in year one, or 25%, you need to ask this as it can make a huge difference.

It's not QUITE as bad as this with BMW finance.

The total interest charges on my loan over 48 months are £6K.

If I end the loan early, the settlement is more like this:

12 Months - 45% interest / £2700 - balanced payments would be £1500

so the 'Extra' interest charge - £1200

24 Months - 70% interest / £4200 - balanced payments would be £3000

so the 'Extra' interest charge - £1200

36 Months - 90% interest / £5400 - balanced payments would be £4500

so the 'Extra' interest charge - £900

Because the loan is over £25K it's 'unregulated' which means that BMW don't provide these figures upfront unless you ask. This is really sneaky and your advice about asking for this is spot on.

I didn't ask, because I assumed that they would be in line with those on my previous 'regulated' loan. Fortunately, they pretty much are, but BMW could have legally charged very differently.

What I underestimated this time was the resale value of the car versus the settlement charge. Clearing the additional interest isn't too big a deal, but a shortfall in the value of the car is more of a problem.

[Art Man]

Flat rate is a tool, nothing more, nothing less. It is the easiest and quickest way to calculate the total interest on a loan, calculate the monthly payments and for the consumer to readily understand it. The lender may set up a record showing the total amount due and reduce the outstanding balance every time a payment is made, but if a request for early settlement was made, the lender would use some method to recognise more interest is due at the beginning than at the end of a loan. The proper way would be to use compound interest, but the Victorians found this cumbersome, so develop a method called Rule of 78. This soon became adopted by the industry and even enshrined in the Customer Credit Act 1974. It major weakness is that it overestimates the outstanding balance at the beginning of a loan, to the point that more could be due than was actually borrowed. So recognising the spread of computers within the world, the Government in 2005 (!!) changed the method of calculating a redemption figure; by basically applying the calculation of monthly interest (although this only applies to loans taken out after May 2005).
I know that the CCA only applies to loans under £25,000. But I believe the major differences are:
1. There is no cooling off period.
2. You cannot return the goods if more than 50% of the total loan has been paid
3. They can reprocess the goods, even if 1/3 has been paid.
4. They don’t have to use the statute calculation for early settlement. However, they could face court action if the settlement charge is deemed excessive.

[NFS]

Originally Posted by Art Man

I know that the CCA only applies to loans under £25,000. But I believe the major differences are:
1. There is no cooling off period.
2. You cannot return the goods if more than 50% of the total loan has been paid
3. They can reprocess the goods, even if 1/3 has been paid.
4. They don’t have to use the statute calculation for early settlement. However, they could face court action if the settlement charge is deemed excessive.

CCA regulated loans have to provide at least 3 examples of early settlement charges on the front page of the agreement, along with a clear statement of the APR.

This is not a requirement of an unregulated loan and BMW will not state the APR, or indicate early settlement charges unless you ask them.

Since most people sign the loan agreement on the day they collect the car, unless you are already aware of this you may not notice on the day (I didn't). Fortunately, BMW appear to calculate early settlement in a similar way on unregulated loans, but their terms and conditions allow them to do otherwise.

BMW are signed up to a code of practice which requires that they provide this information without question when asked. But you still have to ask.

[Art Man]

Originally Posted by needforspeed

CCA regulated loans have to provide at least 3 examples of early settlement charges on the front page of the agreement, along with a clear statement of the APR.

This is not a requirement of an unregulated loan and BMW will not state the APR, or indicate early settlement charges unless you ask them.

Yea your right, I forgot the APR and the 1/4, 1/2 & 3/4 early settlement figures, which were introduced in 2005. It also has to state the rate of interest used within the agreement, which is not the same as the APR, but is used in the early settlement figure.

Since most people sign the loan agreement on the day they collect the car, unless you are already aware of this you may not notice on the day (I didn't). Fortunately, BMW appear to calculate early settlement in a similar way on unregulated loans, but their terms and conditions allow them to do otherwise.

BMW are signed up to a code of practice which requires that they provide this information without question when asked. But you still have to ask.

I seem to have read somewhere that it has to be clear to you at the time of signing that it is an unregulated loan and I mean very clear, not just the heading on the agreement. If this wasn't the case, the rules re regulated loan applies, even if the loan is over £25,000. Trouble is I can't remember where I read it.

[NFS]

Originally Posted by Art Man

Yea your right, I forgot the APR and the 1/4, 1/2 & 3/4 early settlement figures, which were introduced in 2005. It also has to state the rate of interest used within the agreement, which is not the same as the APR, but is used in the early settlement figure.

A regulated agreement has to show 3 examples of early settlement figures, the choice of dates for the example is up to the lendor.

My BMW agreement was for 48 months and provided examples for 6 months, 12 months and 24 months.

It also the APR on very prominent display and stated clearly that it was regulated by the CCA.

Originally Posted by Art Man

I seem to have read somewhere that it has to be clear to you at the time of signing that it is an unregulated loan and I mean very clear, not just the heading on the agreement. If this wasn't the case, the rules re regulated loan applies, even if the loan is over £25,000. Trouble is I can't remember where I read it.

My current loan is 'unregulated', but this was not even mentioned by BMW.

The only clue on the agreement is a very small footnote, which simply says 'unregulated'.

[gIzzE]

Originally Posted by Art Man

Flat rate is a tool, nothing more, nothing less. It is the easiest and quickest way to calculate the total interest on a loan, calculate the monthly payments and for the consumer to readily understand it.

Sorry, that is so wrong, it is not just a tool, it is a way of repaying the loan and the interest.


Just about every lending house including bank loans use a flat rate, and then put an APR equivalent in brackets, and it is not just a tool.
If you borrow £30k even in year 4 you are still paying interest on that £30k, whether it is front loaded or not this is not good.

Search google to see the differences.


To be fair though it is not flat rate vs apr that is the problem, it is how the fees and interest is put on to the loan that is the problem, front loaded loans are getting more and more common, so you need to ask you dealer how much you would owe if you wanted out after a month, if it is more than you borrowed walk away.

[Art Man]

I thought it had to be 1/3 1/2 and 3/4, but I stand corrected.

[gIzzE]

Originally Posted by needforspeed

Gizze - can you actually get a balanced payment deal with a fixed rate and exit charges of just 1 or 2 months interest?

Yeah of course, but again you pay for it.

The lending house will look at the interest rate and say, it is at 5% now and we will give you 2& above base rate on a variable rate, if you want a fixed rate we will do it at 4% above base rate.

This means the base rate would have to go up 4% before they were loosing out, now the chances of this happening are pretty slim, also it may not happen to the final year, and by that time it would have to go up around 8% for them to be worse off, or for you to have been better off.



Examples £30k borrowed over 60 months no balloon.

Fixed at 9%
£617 a month
£7050 interest paid

Variable 7%
£590 month
£5490 interest paid


I would take the gamble, even if the interest went up .25% every quarter for the life of the loan you would still not be worse off with the variable, and that just isn't going to happen, if anything interest rates are falling at the moment.