We bought an expensive to us used car around four years ago.
We had in line to get a Sainsbury’s loan over five years.
The garage (VW main dealer) convinced us that it would be easier and indeed quicker to take out finace through Black Horse. They said the time delay agreeing the Sainsbury’s loan may mean we lose the car.
Now, four years in, we are in a position to pay this off.
I have requested a settlement figure which turns out to be the same as the total of the remaining payments.
Looking at the small print, what has happened is that Black Horse have taken the loan amount, worked out the interest over five years, added that to the loan amount and the divide it by 60 payments.
So, regardless of when the loan is cleared, Black Horse get their full amount back, capital and interest.
This sounds dodgy to me and certainly inconsistent with the salesman at the garage who said that if we clear it early, then we would save interest.
A quick google search suggests Black Horse have some run in with the ombudsman and I am going to call them but wondered if this is legit business practice when it comes to financial matters.
Seems that the garage would have a case or complaint to answer to as well?

Ianal but I wouldn’t think you’d have much of a leg to stand on if it was in the small print when you signed the contract.

You could take it up with the dealer, but I reckon their response will be ‘prove it’

The garage (VW main dealer) convinced us that it would be easier and indeed quicker to take out finace through Black Horse. They said the time delay agreeing the Sainsbury’s loan may mean we lose the car.

Of course they did. No backpaynent from Sainsbury’s to them

My understandign was that if it’s a personal loan then they can’t charge an interest penalty for early repayment. I’m not sure how this applies to car finance – was it HP?

Looking at the small print, what has happened is that Black Horse have taken the loan amount, worked out the interest over five years, added that to the loan amount and the divide it by 60 payments.

this is how I would work out the total payable each month as well, otherwise you’d have large payments at the start, and small at the end. I doubt it’ll affect the amount you’ll still owe though – which will probably be ~30% of the total (as your payments over the last year will be mostly capital, not interest)

Was this mis-sold

Seems so from your description of events, however I think it would be near impossible to prove it to a satisfactory level required for legal action.

Maybe if you report it, and it turns out that miss selling is their common practice it could add weight to the evidence against them, but I suspect that you would still get little if anything back other than the satisfaction of some justice.

the salesman at the garage who said that if we clear it early, then we would save interest

Then the product was mis-sold. You may struggle to prove it though, since this will rest on the credibility of your recollection of what a salesman said 4 years ago vs the small print in the agreement. And of course if the salesman is still around he may well remember the conversation differently if at all.

It’s shown in the Black Horse papers as A HP agreement, papers we received after we took ownership of the car.

If it’s HP then you don’t own the car until it’s paid off and, I suspect, it’s treated differently to a personal loan. I’d get some professional advice.

I appreciate we are four years in but I would have expected to pay less than five years of interest when paying it off in four years.

Think it’s fairly normal. I was a bit surprised when I checked up on the loan I had for my own car which I thought was on PCP, and it turned out to be a cash loan with none of the traditional protection you get with PCP finance. Not impressed with the dealer who hadn’t mentioned this at all but entirely my own fault for not checking the fine print.

I did wonder whether it was worth complaining, but not entirely sure who to and whether it would accomplish anything since the car had been built and deposit paid.

Moral of the story: don’t trust the finance bloke at a car dealership. He was even wearing a shiny suit and I didn’t twig that something dodgy was going on.

You trusted a car dealer to give you financial advice?!?!

😯

Reminds a bit of when I was helping a colleague sort out a new car.

The sales chap genuinely tried to convince her she’d be better off with their finance deal than borrowing the money interest free from her dad…

I don’t know if that’s normal or acceptable, but it wasn’t the case when I had Honda finance a few years back. The termination amount was basically the loan amount outstanding. Like most (?) car finance the total repayment was calculated with a flat interest rate not APR so the interest is front-loaded. But I still paid less after 4 years than I would have after the full 5 years.

You presumably know the “rule of halves” etc but this is unlikely to be useful in your case (I am assuming that you now have equity in the car – I.e. the outstanding payment is less than the current value of car?).

Rule of halves……?
Just spoken to BH and they say I will have saved £93 in interest paying it off early.
The interest over the term is £1662 and is, as mentioned above, front loaded.

This is just a normal “front loaded” loan for the reasons a few folk have mentioned above. A lot of companies will give a bit of a discount for early repayment, but it’s the sort of thing you look at before agreeing to go with a particular company. You also would’ve had 14 days to back out of the agreement so you had time to ensure you’re happy. By any chance does the APR also differ from the rate you thought you were on?

Definitely worth getting on the phone to the finance co about. Be nice though, they haven’t done anything wrong here so you want to keep them onside if the garage have been up to no good.

EDIT: now see you’ve spoken to them anyway.

I’m not so bothered about the finance and payments, more so that there is no benefit to paying it off early unlike if we had a loan.
A quick online tool suggests we’d have been £400 or so better off.
The HP papers are a bit sparse of detail when it comes to early settlement savings, as in the don’t mention the rate or how it is calculated, only that you can request a figure, but the salesman definitely said it was the same as a loan and we’d save, implying it would be like a loan.
I suppose, strictly speaking, we are saving, but not as much as financed with a loan.
I fear this is one to chalk up to experience but a letter to the dealer might be worth a punt.

Probably not an awful lot of use to the issue, but I heard an interesting programme (on radio 4 I think) a couple of months ago suggesting that a car finance mis-selling scandal on a similar level to PPI is rapidly approaching.
On a related note, I think that if it was classified as a bank then the Volkswagen finance arm would be the biggest bank in the world. Allegedly the finance arm makes way more money for Volkswagen than the actual car selling arm does.

The dealer acted as a credit broker for BH. Therefore, the dealer falls under the remit of the Financial Ombudsman Service.

I believe you have to give the dealer the chance (8 weeks) to address your concern. If they don’t, then the FOS can investigate. It is probably worth calling their helpline anyway to ensure you take the correct course of action.

Black Horse have taken the loan amount, worked out the interest over five years, added that to the loan amount and the divide it by 60 payments.

This is how all loans work. Look up Rule 78.

I doubt you’d save £400 by paying the loan back early (regardless of who provided it). There would have been some kind of early redemption charge/penalty which would generally wipe out any “saving”

Personal Finance Agreements are heavily regulated, Sainsbury’s wouldn’t have done it any differently.

There will be a element of interest rebate included, but it will tiny. As you’ve seen the way loans are calculated are front loaded, for the first few years you would have been paying mostly interest, by year 4 you’re paying mostly principle.

As for miss-selling, you would have been given a standardised document of roughly 3 pages to sign which would have explained this in fairly simple English, and probably a longer one of around 14 pages with more in-depth terms.

You’ll struggle to get anything out of a miss-selling claim here.

Harumph.

This is how all loans work. Look up Rule 78.
I doubt you’d save £400 by paying the loan back early (regardless of who provided it). There would have been some kind of early redemption charge/penalty which would generally wipe out any “saving”

That’s not how ‘all’ loans work. Besides the fact this is a hire purchase agreement, the OP is not disputing the terms of the agreement. They are claiming the broker misrepresented the terms.

Not all credit agreements front-load the interest. So to be told the terms were the same as a personal loan from Sainsbury’s was simply a lie.

*withdraws harumph comment*

Just note that ‘front-loading’ and having the interest calculated up front (i.e. to give a fixed monthly payment) are not the same thing.

Rule of halves……?

Google it?

Essentially if you’ve paid off half the amount of the car, you can hand the car back to the finance company with no negative effect on your credit rating.

However if you’ve paid off 4/5ths of the amount it’s likely the car is worth more than the outstanding loan amount so whilst you could hand the car back, you’d presumably be losing out.

Essentially if you’ve paid off half the amount of the car, you can hand the car back to the finance company with no negative effect on your credit rating.

I’d tread carefully there.

Whilst VT is ‘right and proper’ and the likes of Experian and Noddle wouldn’t adjust their made-up scores because of it, real-world impact will be different.

Motor Finance Cos will lose money in most cases of VT (all cases that aren’t tied to a manufacturer) and won’t be keen to finance a car for anyone with a history of VT.

That’s not an option, the car is worth more than the balance.

rockhopper70 – Member
That’s not an option, the car is worth more than the balance.

Sorry, went off piste there.

If you want to investigate further, it’s worth working out whether you’ve got a personal loan or a HP deal. It’s been a few years but I *think* they’re regulated in the same way in terms of early settlement and Black Horse are known for lots of POS Personal Loans dressed up as HP agreements.

A quick online tool suggests we’d have been £400 or so better off.

Not sure how if you are 80% into the agreement that only had £1662 of interest on it – that is 1/4 when you could only expect a maximum of 1/5 (or are you being very approximate with actual months left on the term)?

That’s the figure I got with an online tool, no approximation of months.