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Total Amount Repayable: Car Finance Jargon Busters

When financing a car, it’s important to know the total amount repayable. Why would you need to know that? Well, this is the full amount in total that you need to pay the car finance company. However, this amount doesn’t include discounts, contributions from the car manufacturer or dealer, and your deposit contributions. To know the total amount you need to pay throughout the duration of your car finance agreement, you’d have to refer to the figure called “total amount payable by customer.”

How Much Will I Pay for Car Finance?

If you have a Hire Purchase agreement and you want to check the amount you need to pay throughout the life of your contract, check the “total amount payable by customer.” The same applies if you take out a Personal Contract Purchase deal, and this will include the optional balloon payment you need to pay to own the car. You may also use a car finance total cost calculator found on the website of many car finance companies. 

The “total amount paid by customer” is different from the "total amount repayable" because the first one includes the deposit you paid, all the monthly instalments, the balloon payment for PCP deals, and also purchase fees and other arrangement fees and discounts. This total amount repayable figure will be able to show you if the car finance deal is a good one, so be sure to check it when comparing different offers from various car finance companies. 

What are the Payments for Car Finance?

Car finance is a good way to buy a car without using up all your savings for one big purchase. Instead of paying for the full price of the car, you only need to pay a deposit upfront and then pay monthly instalments for the whole duration of your contract. This could be one year to five years. Some car finance companies even offer car finance for up to seven years

What’s a Deposit in Car Finance?

The deposit is the amount you need to pay upfront before you can get the car, although it is also possible to finance a car without the need for a deposit. The deposit amount goes towards the cost of buying the car so will have the effect of reducing the amount you borrow and pay interest on. There are car finance companies that offer zero-deposit deals though, so that means you don’t need to pay anything outright. Of course this will make your monthly repayments much higher and you will have to pay more in interest since you’re borrowing more money, except, of course, if you got an interest-free deal.

What are Monthly Repayments?

Other than the deposit you pay at the start of your car finance agreement, you’ll need to make payments every month for the whole length of your contract. This also goes towards the cost of buying the car plus interest. Typically many car buyers choose a three-year car finance agreement, although some choose to finish it in two years while others opt for five years. It depends on how much you can afford to pay for your monthly instalments. 

One key thing to remember about your monthly repayments is that you need to pay them in full and be sure never to be late in making payments. If you missed payments, there will be penalties and if you miss a number of payments already, the car finance company can repossess or take back the car you’re driving. It’s also not good for your credit score as missed payments, arrears, or defaulting on your car finance agreement will be recorded in your credit report. 

If you’re experiencing financial difficulties, and have trouble meeting your monthly instalments, get in touch with the car finance company immediately so that they can help you. The lender might be able to give you a new payment arrangement that is more affordable for you. They can even lengthen your contract so that the monthly repayment amount can be reduced. What’s important here is to communicate with the car finance company, be honest, and express your intention to honour your agreement with them. This applies to any debt you cannot meet. 

Options at the End of a Car Finance Deal

If what you have is a Hire Purchase deal, then once you’ve made all payments, the car is yours at the end of your contract. And since it is under your ownership, you may modify it, sell it, or even part-exchange it for another car. If you have a Personal Contract Purchase deal, however, then it’s a bit different. 

In a PCP agreement, the car won’t be yours at the end of your contract because you would still need to pay the optional final payment or balloon payment. But what if you don’t want to own the car, can't afford the balloon payment,  or you don’t need it anymore? In this case, you can simply return the vehicle to the car finance company and not pay anything else. Bear in mind that the car needs to be in good condition (an acceptable level of wear and tear is permitted) and it hasn’t exceeded the mileage limit. 

How to Compare Car Finance Deals

When comparing different car finance deals, you should check the Annual Percentage Rates (APRs) and the total amount payable. The APR includes the interest and all fees, converting them into a figure which you can then use to compare with the APRs of other car finance companies. 

APRs are calculated in the same way by every company, so it’s better to check this figure than merely looking at the interest rates. You want to choose a car finance quote with the lowest APR figure because that would most certainly be the one with the most affordable deal. You can also use the car finance repayment calculators that are usually available on most websites of car finance companies. It’s faster and easier to compare deals this way. 

Takeaway

When comparing car finance deals, be sure to check all the details of the quote. It may seem daunting at first because you’ll be looking at a lot of numbers. However, you can focus on the total amount repayable and the APRs if you want a quick comparison. Also, you may use car finance comparison websites that will collect different deals and allow you to check them at a glance. What’s important is for you to take the time to find the best car finance deal that suits your needs and financial situation.  😀

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