Car Loan Interest Rate

[Heman75]

Vezel/ HRV kerb weight is so heavy at > 1.2 tonnes. Every additional horse power helps. And Vezel is using a newer engine.

 

Vezel comes in same body with a more powerful and newer engine, yet cheaper, why wouldn't buyers compare?

 

bro ... the reason why one steps into KM/AD ... is to buy a peace of mind (we all know they are more expensive and less equipped).... thus doing and asking such comparisons in front of them makes you look kinda of weird. They are just being honest and direct ... maybe not put across properly ... 

i wont go into AD and tell them what PI offers. but rather i would say what other brand of AD offers.

google is your best friend

 

total interest is correct though

 

but actually in mcf, effective interest rate should be 0 ie full cash

 

when you pay in full, they will up the selling price by 2k usually.. so rather take minimum sum for minimum 1 year

eff interest rate is not calculated this way lah

 

i agree not calculated this way.. effective interest rate is actually based on decreasing loan principle as you pay

[Hosaybo]

take one year loan lor. Then the interest rate will be equivalent to the effective interest rate.

[Kusje]

typically there are discount if you use the bank tie with the AD.This discount has already be amortized into the selling price of the car. 

 

When I see mine, it show 2.5k discount from using their bank. do my own math and decide whether will I profit more if I use Citi direct instead. . In the end, I used back AD one since it is almost the same but hassle free

 

That's still possible when the difference is 2.5k. But now they are talking about 10k!

[hsl118]

Minimum loan is 50k to qualify for the $500 discount at KM.

 

When querying about paying in full (genuine as family member is interested to), was asked why would I want to do that when there is additional few thousands charge.

 

Took it as my cue to move on, maybe should check out QQ next.

[Enye]

Minimum loan is 50k to qualify for the $500 discount at KM.

 

When querying about paying in full (genuine as family member is interested to), was asked why would I want to do that when there is additional few thousands charge.

 

Took it as my cue to move on, maybe should check out QQ next.

 

went to test the QQ and HRV with a friend who was buying for his wife

 

let's just say between the 2 and without going into specifics, my choice would be the QQ

 

[Vinceng]

The key to peace of mind when buying from PI is to buy from the established ones. Had several friends buy from the big names and no issues. They even informed one of my friends when there was a recall.

[Forte3737]

Minimum loan is 50k to qualify for the $500 discount at KM.

 

When querying about paying in full (genuine as family member is interested to), was asked why would I want to do that when there is additional few thousands charge.

 

Took it as my cue to move on, maybe should check out QQ next.

Komoco. Pay them a visit

[Runforyourlife]

Minimum loan is 50k to qualify for the $500 discount at KM.

 

When querying about paying in full (genuine as family member is interested to), was asked why would I want to do that when there is additional few thousands charge.

 

Took it as my cue to move on, maybe should check out QQ next.

 

They are not concerned with selling the cars, they most interested in personal profit? :S

[Silklee]

As a rule of thumb, the effective interest rate is about twice that of the interest rate that you are being quoted for a car loan (not so for a housing loan). So a 2.78% interest is effectively about 5.5%.

[Fruit-tart]

 

As a rule of thumb, the effective interest rate is about twice that of the interest rate that you are being quoted for a car loan (not so for a housing loan). So a 2.78% interest is effectively about 5.5%.

 

I still dont understand lehh.. whats effective interest rate?? why they put inside the car loan?then should we look at the interest rate or effective interest rate for car loan?? e.g interest rate at 3.88%, effetive interest rate is 8.25%. then whats the 8.25% for??

Edited January 12, 2016 by Fruit-tart

[Fruit-tart]

take one year loan lor. Then the interest rate will be equivalent to the effective interest rate.

but i see some says effective interest rate 8% for car loan lehh.. i also confused between interest rate (3%), and effective interest rates (around 8%)... based on current market.

[Silklee]

Let me try to explain it this way. 

For a housing loan, for every single dollar you pay, part of it is used to pay off the principle and interest amount. THEN, the interest is calculated based on the reduced principle amount. So every month, even if you pay the same amount, more of it is used to offset against the principle, less of it is used for interest payment.

 

For a car loan, the total interest payable is calculated upfront for the entirety of the loan period.

 

In the example quoted, [1% interest on a 100k loan for 5 years], the total amount of interest that you have to pay is calculated upfront, i.e. 1% x 100k x 5 years. So you pay a total of 5k interest. 

 

The effective interest rate is therefore NOT 1%. It is NOT 5k/100k/5 years. 

Simply because you do NOT owe the bank 100k at all times for the entire 5 years. The amount you owe them is always decreasing during the 5 years. So by right, you should be paying them less in interest since the principle amount is reduced. BUT NO.. the interest you pay them is already determined upfront.

 

Hope I didnt confuse you all more.

Edited January 12, 2016 by Silklee

[Silklee]

Usually, people will use the effective interest rate if they want to decide whether to pay in cash or take a car loan.

 

There is a formula to convert the car loan interest rate to the effective interest rate but I dont know what it is now (Google is my friend though). 

 

So we should convert the interest rate to the effective interest rate, then compare the effective interest rate to a typically risk free investment or one that someone is comfortable with and then decide whether to pay in cash or take a car loan.

 

 

e.g. say the effective car loan interest rate is 5%, and the bank interest rate is only 3%, then one should use his cash to pay for the car and not take a car loan.

 

Of course, you also have to factor in discounts given by the dealers for taking a loan etc. 
And of course, this point is totally moot unless you actually have cash.

 

But in essence, this is the significance of the effective interest rate. 

 

You should compare the effective interest rate (and not the quoted interest rate) against the interest rate of a (relatively) risk-free investment vehicle to decide if you should take the loan or not.

[Doppel]

Let me try to explain it this way.

For a housing loan, for every single dollar you pay, part of it is used to pay off the principle and interest amount. THEN, the interest is calculated based on the reduced principle amount. So every month, even if you pay the same amount, more of it is used to offset against the principle, less of it is used for interest payment.

 

For a car loan, the total interest payable is calculated upfront for the entirety of the loan period.

 

In the example quoted, [1% interest on a 100k loan for 5 years], the total amount of interest that you have to pay is calculated upfront, i.e. 1% x 100k x 5 years. So you pay a total of 5k interest.

 

The effective interest rate is therefore NOT 1%. It is NOT 5k/100k/5 years.

Simply because you do NOT owe the bank 100k at all times for the entire 5 years. The amount you owe them is always decreasing during the 5 years. So by right, you should be paying them less in interest since the principle amount is reduced. BUT NO.. the interest you pay them is already determined upfront.

 

Hope I didnt confuse you all more.

Great explanation!

 

To add to the "confusion":

 

For housing loans, the interest is based on reducing balance.

 

For car loans, the interest is front-end loaded.

 

Hence the difference in effective interest rates.

[Wt_know]

$5k (interest) / $100k (loan) = 5% effective rate?

 

Edited January 12, 2016 by Wt_know

[Silklee]

$5k (interest) / $100k (loan) = 5% effective rate?

 

No. there is a specific formula. In any case, interest rates are quoted in yearly terms. So, in your calculation above, you need to divide it over 5 years. But still, that doesnt give you the effective interest rate. 

[Silklee]

$5k (interest) / $100k (loan) = 5% effective rate?

Sorry. double post.

Edited January 12, 2016 by Silklee

[Fruit-tart]

Thanks for explanations.. now effective interest where got 5%?? All i see like 8% up.lol. so i hv to actually take into account 8% interest ahh?thats alot for a car loan!!