Buying Car Questions

[f1br3opt1c]

Ok guys, lets say if i wanna get a Honda Civic 1.8 that costs 115k OTR. Please advise is it better to pay 40-50% down payment then take 9 years loan to pay off the rest.

Or keep aside the money i have and just pay 10% down payment and take 9 years loan.

Im choosing 9years loan cause civic is considered long term car and if i buy i doubt i will sell it.. Will use long term and take care of it like my baby :)

Please give me suggestions or advise. Thanks!!

 

[yeehau86]

Let me brief you on the financial side:

Loan 9 years doesn't mean because you will be using the car for long term, but there is one thing you need take note of :

Interest rate

The longer you take to settle the loan, the more you need to pay for the interest rate. If you can pay 40 to 50% of down payment without compromising your daily expenses, I would suggest you to do it. Why?

Situation A
if you dropped 40 - 50% down payment already, meaning you only take 50 - 60% of the 115k for loan purpose (at most loan 60% x 115k = 69k).
Let's say IF the interest rate is 2%, one year you have to pay RM 1380 for the interest rate charges to the bank.
So by maturity, you need to pay RM 1380 x 9 = RM 12,420 extra to your total car cost. Meaning you have to pay RM 115,000 + RM 12,420 = RM 127,420


Situation B
Pay 10% downpayment, loan 90%. Meaning loan RM 115k x 90% = RM 103,500
IF interest rate 2%, one year pay RM 103,500 x 2% = RM 2070 for the interest rate charges to the bank.
By maturity, the total of interest rate would be RM 2070 x 9 = RM 18,630
Meaning you have to pay RM 115,000 + RM 18,630 = RM 133,630

If you choose Situation A, you will save RM 18,630 - RM 12,420 = RM 6,210

I think this should be clear which situation is better.

 

[f1br3opt1c]

Thanks a lot bro for your breakdown.

After some suggestions i was thinkin of going for 40% down payment.

So that means RM115,000 - RM46,000 (40%) = RM69,000 (60% loan from bank)

I was told by the Honda sales person interest rate is at 2.95 now and might go up to 3.2. So lets just take 3.2
So total would be RM69,000x3.2% = RM2208 x 7(Years) = RM84,456 total repayment to the bank.

Divided by 84 months that would put it at RM1005.40 per month.

Correct me if im wrong.

Also about interest being 2% did you just come up with that or are there banks giving such interest rates?

 

[yeehau86]

that 2% is just an example only, not refering to any rate from bank. With the economy booming now, it is hard to see 2% rate loan. If you borrow from bank last year, perhaps there is 2% whereby that time is financial crisis.