High Net Worth Individuals Save Thousands on Car Finance Costs

Once upon a time, well before April 2007, the Consumer Credit Act only applied to finance agreements under £25K in size, and didn’t apply at all to limited companies.

This meant that any one privately buying a vehicle where the amount financed was greater than £25K had the option of taking fixed interest rates or variable interest rates.

The thinking was that you were deemed “sophisticated” enough not to need the protection of the Consumer Credit Act if you borrowed over £25K.

Then in April 2007 the £25K limit was removed meaning that any amount borrowed by a consumer would fall under the terms of the Act. This meant that all consumers now benefited from the CCA protection and this is obviously a good thing as there are many benefits and protections in place.

However there has been one significant and probably unintended consequence. The Consumer Credit Act does not allow secured loans (which a car loan is) to use variable interest rates.
 
This means that unless you qualify as a High Net Worth Individual you would have to have a fixed interest rate agreement, and with variable rates being so low this is a real cost to most people.

However, if you are lucky enough to be classed as a High Net Worth individual then all the options await you. You see, its been decided that you are sophisticated enough to be able to choose to take the risk of a variable interest rate deal, if you want to, or stick to the safety of fixed rate agreements. Aren't you lucky!

So what makes someone HNW, and do you qualify?

There are two criteria, and you must satisfy at least one to qualify:

1. Either have earned in excess of £150K in the last financial year
2. Have net assets, excluding your main residential property, of £500K

If you can answer yes to either of these and your accountant is happy to sign a declaration to this effect you can qualify for variable rate finance. In the last 2 months we have assisted one of our clients secure funding at 2.2% above current LIBOR rate of 0.5% - believe it or not that is 1.4% Flat or 3% APR – this is not a typo!

Whilst we cannot secure those terms in every case, if you qualify as High Net Worth you can certainly access an incredible deal right now.

To learn more please call MacManus Asset Finance on 0845 3300 455.