APR-Led Finance

Important dealer information

As of the 4th November 2015 you may notice a change in the way that we quote customers as we will no longer be using flat rates, instead, we will be using APRs.

If you’re a customer looking to get any form of finance such as mortgage, credit card or bank loan you will be given an APR so you can compare like-for-like quotes. This is in most areas of finance but is not widely used in vehicle finance as flat rates are still in use.

As a customer-focused company we don’t believe this is easy for the customer to understand, especially when, legally, all documentation has to show the APR. In order for a customer to be able to compare vehicle finance they need the APR as this takes into account all fees that the customer will pay in their finance package.

To make this simpler we’ve created a new video that you can view below. The video talks through the reasons we’ve moved over to APR-led finance rather than sticking with the traditional flat rates. Moving to APRs means that customers are able to compare apples with apples, not apples with oranges. 

Video script

‘You may have heard the saying “it’s like comparing apples to oranges”, that’s how we feel about comparing finance packages with a flat rate. Let’s look at an example.

2 companies might have similar products but with different ways of dicing the costs. 1 company might have a flat rate of 15%, which on its own doesn’t mean an awful lot but if you add another product with a flat rate of 21% you may assume that the original product, in this case the apple, is better. So let’s take a closer look.

Although the apple has the lower rate it also has fees totalling £799 however, the orange with the higher rate, has no fees.  Looking even closer the apple has a monthly payment of £273 with an APR of 42.66%. The orange has a monthly payment of £271 and an APR of 41.78%.

By looking at two products with a flat rate you’re comparing apples and oranges. The only way you can truly compare is by looking at all the information but by looking at the APR we can be sure that we are comparing apples with apples.

So which one’s the cheaper option? This product [the apple] has a lower APR and a total lower repayment.

APR versus Flat Rate

[An example of comparing apples with apples]

At First Response Finance Ltd we believe that it is important to be fully transparent with our customers. With this in mind we use APR when discussing and comparing rates so that we’re comparing apples with apples.’

< Back to blog | Next: Best Car Finance Providers >