correct me if i'm wrong. here's an example:
suppose a car needs $120,000.
and a person pays a downpayment of $20,000. which means the person
still needs to pay $100,000.
this person borrows a loan from the bank. the longer the repayment
length (usually it's 5, 7, 10years), the higher the interest.
for 7years loan @ 2.6% per annum, this interest rate is calculated
for the $100,000 with the following (agar-agar) formula:
Total amount to pay over 7 years
= $100,000 x (2.6 x 7) + $100,000
= $118200
The monthly repayment will be
= $118,200/(7x12)
= $1407
Of course, it'll be slightly lesser than this but it's an alright
approximation.
Now, suppose for the same car of $120,000 this person takes a
0-downpayment (if he's lucky in able to do that).
Then for the same 7years loan @ 2.6% per annum,
Total amount to pay over 7 years
= $120,000 x (2.6 x 7) + $120,000
= $141,840
The monthly repayment will be
= $141,840/(7x12)
= $1688
That's a difference of about $250/mth. SOunds little, yes. But it
WILL matter a lot when you start worrying about the monthly petrol,
road tax and insurance...
So as you can see, the more the downpayment initially, the lesser
you'll have to pay per month.
So it'll be better if you take on a 10yrs loan right? since the
repayment period will be extended to 3 more years...
WRONG!!!!!!!
because, unless you can tahan driving your car for very long,
you'll have the urge to change your car.
but, if you do change your car sooner then a certain period, you'll
have to fork out extra money because you're still servicing your
interest from the loan.
from what i heard, for 7years loan, you should not sell your car
until the end of the 3rd year or you'll have to fork out the extra
money.
for 10years loan, i heard its at the 5th year.
that's why someone here mentioned that he must tahan till he's able
to sell his car without making any loss.
