How is the cost of credit for a new car loan calculated?

kevincool

Hi,
I am planning to buy a new clio. The information on the website for a basic clio is:


36 monthly payments of: €151
RRP: €15,190
Deposit / Part exchange: €5,224
Term: 36
Optional Final Payment: €6,030
Total Cost of credit: €1,655
Typical APR: 6.9%

I am not getting how is this 1,655 of cost of credit has arrived, I used some online calculators and never got this amount. Could someone explain the formula to get this 1655 amount based on the info provided or direct me to some online calculator please. This 1655 also includes 155 euros of some document and other charges so we have to get to a price of 1500 euros.

Atlantic Dawn

€5436 total payments
€5224 total deposit
€6030 final payment
€155 doc fee
€16845 Total Cost

€16845 minus RRP €15190 is €1655 (total cost of credit)

kevincool

Atlantic Dawn wrote: »

€5436 total payments
€5224 total deposit
€6030 final payment
€155 doc fee
€16845 Total Cost

€16845 minus RRP €15190 is €1655 (total cost of credit)

But where did you use the APR of 6.9%. I want to know how the cost of credit is calculated using the APR of 6.9%

ironclaw

kevincool wrote: »

But where did you use the APR of 6.9%. I want to know how the cost of credit is calculated using the APR of 6.9%

Its not related to the APR, well not directly. Its the difference between buying the car outright (The RRP) with no finance versus the cost of paying for it via finance. Or am I missing your question?

kevincool

ironclaw wrote: »

Its not related to the APR, well not directly. Its the difference between buying the car outright (The RRP) with no finance versus the cost of paying for it via finance. Or am I missing your question?

So how do you calculate that extra amount of 'cost of credit'. There has to be some sort of calculation (with interest rate) to know how much extra a customer has to pay with finance.

For example if my car costs 10,000 and I am repaying it in 3 years then how much extra I have to pay?

Riskymove

kevincool wrote: »

36 monthly payments of: €151
RRP: €15,190
Deposit / Part exchange: €5,224
Term: 36
Optional Final Payment: €6,030
Total Cost of credit: €1,655
Typical APR: 6.9%

The Car costs 15,190
Trade-in is 5,224


This leaves 9966

The Optional payment is 6030

This leaves 3936

This is the amount financed


36 payments of 151 is 5436


5436 means you pay 1500 more than 3936


There is your 1500

add the 155

and you get 1655

Ludo

That all makes sense but it still doesn't answer this:

kevincool wrote: »

But where did you use the APR of 6.9%. I want to know how the cost of credit is calculated using the APR of 6.9%

If you use any online loan calculator and enter 3936 over 36 months at 6.9 percent, it sure as **** does not add up to 1500 cost of credit...more like 400.

You are actually financing 9966 and not 3936.

See here:
http://www.thecalculatorsite.com/finance/calculators/carloancalculator.php

MuppetCheck

The difference is probably a documentation fee or something like that.

To work out a payment it's
Amount Financed/(term/1.069)

For the Financed amount about it should be 36x€117.

28064212

Ludo wrote: »

You are actually financing 9966 and not 3936.

Correct. Unlike the initial deposit, the final payment of 6030 is part of the loan. If there was no balloon payment, your monthly repayments would be significantly higher (~€300), or you would need a much longer payment term

nompere

At the start of the three year term you are borrowing €9966. By the end of the three year period you still owe €6030. So you've repaid €3936 during the period.

The average amount of debt over the period is €7998 (€9966 less 1/2 of €3936). 3 years interest at 6.9% on €7998 is €1655.59.

kevincool

[QUOTE= 3 years interest at 6.9% on €7998 is €1655.59.[/QUOTE]

How did you arrive at this? What is the calculation formula you used?

28064212

kevincool wrote: »

How did you arrive at this? What is the calculation formula you used?

6.9% (the annual percentage rate) of 7998 is 551.862, times 3 (three year loan) = 1655.586