[JD6]

I took the minimum amount of finance (HP) on the Mini in order to qualify for a £700 deposit contribution. The rate is 11.5% so naturally I’m paying it off. The dealer asked me to pay it off after the first payment had been taken after a month - presumably so they can earn some commission.

So 40 odd days after buying the car, I call Mini FS (part of BMW FS) for a settlement figure which they provide. It doesn’t agree with my calculation and unfortunately they don’t seem to be able to provide any justification - it’s just the computer says this…

Having not used finance before, perhaps there’s something I’m missing, but my approach is to calculate

(Days/365 x 11.5% x loan amount) + loan amount - monthly payment made

This is even slightly over as a very small part of the capital will have been repaid in the first monthly payment, but the difference is a few pence so for simplicity this is the calculation I have used to pay off the balance.

Their figure equates to around 90 days interest using my formula above, rather than 40. I have escalated it but so far no luck in finding someone who can explain their figure and give me a detailed calculation.

I thought I might have more luck getting an explanation here!

[xenon]

I suspect interest is charged monthly, or part thereof, rather than daily, so 60 days would make sense. Not sure where they get 90 though...

[davyk31]

Maybe there are arrangement and settlement fees to factor into the costs?

[JD6]

Originally Posted by xenon

I suspect interest is charged monthly, or part thereof, rather than daily, so 60 days would make sense. Not sure where they get 90 though...

That is possible that they charge in whole months. It would be a little odd and as you say, wouldn’t fully explain the difference.

Originally Posted by davyk31

Maybe there are arrangement and settlement fees to factor into the costs?

I don’t think that there are fees. I was told that there weren’t when I bought the car and I can’t see any listed. Perhaps somewhere deep in the small print, but I’d still like to know about them rather than just be given a black box figure.

[KCH1984]

As far as I was aware, they are entitled to charge interest from the date the loan was made up until the date of settlement, I’m assuming that any capital repayment already made will be factored in. So I’d agree with the basis of your calculation, are they possibly assuming a future settlement date beyond what you’ve indicated?

[JD6]

Originally Posted by KCH1984

As far as I was aware, they are entitled to charge interest from the date the loan was made up until the date of settlement, I’m assuming that any capital repayment already made will be factored in. So I’d agree with the basis of your calculation, are they possibly assuming a future settlement date beyond what you’ve indicated?

I called up yesterday for a figure to settle straight away. Their settlement date seems to be 28 Feb (a month later) for some reason, but even this wouldn’t explain the 90 days interest they seem to be charging.

There is no breakdown unfortunately and no one there so far seems to be able to explain it.

[Rukka]

I paid off RR finance a few months ago (Black Horse). I noticed early on (unfortunately not before taking the finance) that there was a minimum 90 days interest to be paid in the event of settling during that window.

Maybe BMWFS charges the same minimum 90 days interest? Have a deep read of the contract if you haven’t done so already.

I know in the past, people have taken finance to get deposit contribution and paid off within a couple of weeks, paying minimum interest as you are aware. I ‘believe’ there have been moves to dissuade this practise and maybe this minimum charge of 90 days interest is part of it.

[JD6]

Originally Posted by Rukka

I paid off RR finance a few months ago (Black Horse). I noticed early on (unfortunately not before taking the finance) that there was a minimum 90 days interest to be paid in the event of settling during that window.

Maybe BMWFS charges the same minimum 90 days interest? Have a deep read of the contract if you haven’t done so already.

I know in the past, people have taken finance to get deposit contribution and paid off within a couple of weeks, paying minimum interest as you are aware. I ‘believe’ there have been moves to dissuade this practise and maybe this minimum charge of 90 days interest is part of it.

It is possible that there’s a minimum period, although the dealer aren’t aware of it and neither were any of the Mini FS people I’ve spoken to so far. It’s also not obvious from the paperwork, but it is possible it’s hidden somewhere. I would have thought that in effect encouraging people to stay in debt and not to pay off a loan could be against the regulations.

The dealer actually suggested that if I didn’t need finance, I take the minimum and pay it off after the first payment to get the contribution.

[saltyamigo]

We did the same when we purchased our Mini as we got £1K discount and a service plan. We were told by the dealer to wait for 3 payments to clear before paying off the balance.

[saltyamigo]

It does say they charge interest up to the settlement date plus an extra month, would that explain the difference?

[JD6]

Originally Posted by saltyamigo

It does say they charge interest up to the settlement date plus an extra month, would that explain the difference?

That’s very interesting - thanks. That extra month beyond the settlement date, which is itself almost a month away, would explain the difference. However my settlement quote doesn’t include that wording about the extra month.

However, it does refer to the Early Settlement regulations so looks like I need to take a look at those

[JD6]

Having looked at The Consumer Credit (Early Settlement) Regulations 2004, it seems that they are entitled to add a month of interest. In addition they can add another 28 days for the Settlement Date. The addition of this 28 days plus a month does account for the difference.

It’s a shame that both the selling dealer and Mini FS people aren’t aware of this.

Deferment of settlement date
6. Where the agreement provides for the credit to be repaid over, or at the end of, a period which is more than a year after the relevant date, the settlement date for calculation of the rebate may be deferred by—
(a)one month, or
(b)where the length of a month’s deferment would be more or less than 30 days and the creditor so elects, 30 days.

https://www.legislation.gov.uk/uksi/2004/1483

[E60525d]

Originally Posted by JD6

Having looked at The Consumer Credit (Early Settlement) Regulations 2004, it seems that they are entitled to add a month of interest. In addition they can add another 28 days for the Settlement Date. The addition of this 28 days plus a month does account for the difference.

It’s a shame that both the selling dealer and Mini FS people aren’t aware of this.

That's a shame but I presume your still better off due to the initial dealer contribution?

[JD6]

Originally Posted by E60525d

That's a shame but I presume your still better off due to the initial dealer contribution?

Yes the £700 deposit contribution far outweighs the extra interest. It does feel like they have deliberately made it harder to find out about this extra month of interest when you look at the wording of the 2 settlement agreements above. Mine post dates saltyamigo by about a month so they have altered the wording to make it less clear. Not great.

My main gripe is that Mini FS and the dealer have no idea about it, leaving me going round in circles. Thankfully this forum cleared it up within a day.

[1 AKY]

Originally Posted by JD6

It’s a shame that both the selling dealer and Mini FS people aren’t aware of this.

Another mis-selling scandal?

[xenon]

Originally Posted by 1 AKY

Another mis-selling scandal?

Not that I see - previous scandals were presenting untruths as fact; in this case it is written in the contract of the finance agreement and if you don’t read it or fail to understand it that’s your problem. The dealership makes it quite clear that they are “a broker not a lender” which means they can’t give financial advice or be held liable if you don’t understand it.
It is ridiculous that Mini FS were unable to explain it clearly but I don’t think anything was mis-sold.

[Wills2]

They know about it they are just playing dumb, they charge a months interest as allowed for early settlement sooner you settle the bigger that amount, same as BMW FS which of course is he same as Mini FS

[JD6]

Originally Posted by Wills2

They know about it they are just playing dumb, they charge a months interest as allowed for early settlement sooner you settle the bigger that amount, same as BMW FS which of course is he same as Mini FS

I think the dealer and the people I spoke to at Mini FS genuinely didn’t know about it, but the system is automatically adding 58 days of interest to every loan which is repaid early. 28 days of this comes from putting the settlement date that far away, even if you want to settle today, and a further 30 days as this is permitted within the Consumer Credit Regulations 2004 (as above).

So while they do appear to have the right to add this maximum 58 days of interest, I suspect that by making it deliberately obscure and difficult to discover, they aren’t following the spirit of the regulations.

Not that I can be bothered to do anything about it over a fairly modest sum, but I can see a situation where they will be held to account at some point in the future, particularly as dealers are telling people that there are no fees for early repayment. If they clearly stated in the agreement that there is a 58 day interest penalty for early repayment they’d cover themselves in my view.

[davyk31]

I would ensure they are paid on the last day of the payment window. No point paying early if the cost is the same and letting them advantage from your money.

[Mick.86uk]

Not sure why you were asked to pay it off after the first payment had been taken.

I purchased the Mrs a 2021 Cooper Sport from main dealer on the 19th Jan, paid it off in full on the 22nd and was charged £5 per day interest so £20 on top of the balance.

I made my intention clear to the salesman that I would be taking the finance for the £1000 contribution and then paying it off within the first 14 days, no questions asked.

[un1eash]

He asked him to wait to make sure they got their bonus for setting up a finance agreement.

[Mick.86uk]

I thought they received the bonus as soon as you sign the finance and drive the vehicle away.

Surely they would have asked me to do the same if they would lose out on the bonus.