how do i work out apr rates

[pagzzy]

sorry for the stupid question but how do i work out the apr of a car finance.

i got the rrp, the deal and the interest i am paying - so how can i work out the apr rate .....

thanks

 

[MOCAŠ]

Try this: Loan & APR Calculator

 

[pagzzy]

Ahhh thanks for the link

But I can't add up my sums how the heck do mb work their pcp out

 

[hawk20]

sorry for the stupid question but how do i work out the apr of a car finance.

i got the rrp, the deal and the interest i am paying - so how can i work out the apr rate .....

thanks

You shouldn't need to. Ask the dealer really clearly what the APR is.. They are to supposed to provide you with that info.

Don't ask what is the interest rate as they often then tell you the discredited 'flat rate' (which is about half the rate of interest you are really paying). Stress that you want the APR. Better still ask them to print it out for you.

Calculating the APR yourself is not easy unless you have some training in this sort of thing. If you are canny with Excel spreadsheets you can write down the full cash flow (all monthly payments, plus admin fees, plus the deposit, plus the option to purchase fee and solve for the IRR (Internal Rate of Return). The formula is given in the 'Insert' menu as insert function. But you need to know how to convert an annual APR into a monthly figure etc. Easiest to ask the finance provider.

 

[hawk20]

Try this: Loan & APR Calculator

Yes but it doesn't show you how to get the APR from the deposit, plus payments, plus admin fees, plus option to purchase fee which are nowadays typical.

 

[Rory]

As others have said, you can't easily work it out, but APR on a loan is near as dammit double the flat rate.

 

[Wizeng]

Try (total payment)/(amount borrowed) to the power of (1/No of years):bannana:

 

[hawk20]

Try (total payment)/(amount borrowed) to the power of (1/No of years):bannana:

Seems appealing but the total payment includes the deposit and no interest is charged on that.
Also does not allow for timing of payments -the admin fee is upfront. The option to purchase is at the end. The monthly payments are spaced evenly over the life of the loan. Need a full cash flow to solve for APR.

If you bought a car for £1,000 and with interest paid £1331 for it -and paid that in one single payment at the end of ten years, then the APR would be 10% as shown by your formula. (easy to see that £1000 earning 10% interest would accumulate to £1331 after three years -with no withdrawals). So for this example your formula is fine.

But a PCP is different. You don't pay it all back in one payment at the end of three years. You pay monthly. And you pay a deposit up front. And an admin fee upfront. And an option to purchase at the end. All these affect the APR and so for a PCP your formula would not give the APR correctly.

 

[hawk20]

Here’s a real example of an MB PCP.
Car costs £22,103.94
Deposit: - £3241
Balance financed: - £18862.94
Add finance charge on the balance financed (include £180 admin fee and £95 option to purchase fee) £2,472.06
Balance payable £21,335.00
Total Amount Payable £24,576

On Wizengs formula Total payment/Amount borrowed equals 1.3028
And the cube root of that (“1/number of years”) is 1.092 which gives an APR of 9.2%

However the correct APR is 5.8%

If we knock out the deposit and modify the formula to read Balance Payable/ Balance Financed we get 1.131 and the cube root of that is 1.042 giving an APR of 4.2%. That would be correct if we did not have to make monthly payments etc, but instead made the loan repayable in one single large payment at the end of 3 years.

But in practice we pay monthly right from the start of the agreement and the true APR is 5.8%

 

[pagzzy]

came across this its an excel pcp calculator

Unblue

 

[hawk20]

came across this its an excel pcp calculator

Unblue

Sadly it does not solve for the PCP as the OP wanted. It soilves for the payments you need to make (after you have plugged in lots of data including the APR)

 

[hawk20]

Even more sadly Pagzzy the formulas in the unblue spreadsheet are not correct.
1. The interest rate shown is not the APR
2. There is no admin fee or option to purchase fee.
3.The "Total Paid Amount" shown at £11,800 is wrong. He shows 36 payments but only includes 35 of them in the total. He does include the GMFV but forgets to add in the deposit you have paid and forgets to add in the part ex value of your car that you have also put towards the total cost.

The correct total cost is 36 x £244.30 plus £250 deposit plus £500 part ex value of your trade in, plus £3250 GMFV giving a total of £12,795. But even that ignores admin and option to purchase fees.

 

[hawk20]

Sadly it does not solve for the PCP as the OP wanted. It soilves for the payments you need to make (after you have plugged in lots of data including the APR)

Meant to say does not solve for the APR which the OP (Pagzzy) wanted.