14% interest rate

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crilley

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Hi guys

We're looking to buy a car. We've picked out a nice Honda Jazz, low kilometers. the car company is organizing finance though, and for an 85k car with a 11k deposit, they've said the installments are 2k a month for 55 months. The interest rate is 14% Is that high? It sounds high to me, but I'm not very experienced in this.

Thanks
 
You're taking out finance on 74K, which is quite a small amount and the smaller the loan, the higher the interest rate. Luckily though with a smaller loan, the actual interest in Rand terms isn't too high.

Having said that, try shopping around a bit, you will probably get it down a bit if you push.
 
That's prime + 5.5%, which seems excessive. Keep in mind however that you're bound to get slightly higher rates as first-time buyers and on smaller amounts (don't know whether the former applies). Also keep in mind that a 4% swing on a R75k loan over 54 months would translate only to a difference of ± R150 on your monthly instalments.
 
prime + 5.5% is ridiculous.

I'm about to start hunting around for a vehicle, but i wouldn't even begin to consider rates above prime + 2%.. and even then i would be reluctant to take it.
 
Huh. It would only swing it by 150 rand or so? Didn't think it would so little. (And we plan on paying the car off quicker than 55 months. Hoping to have it paid off this year.)
 
There is the principle of the matter, sure, but interest rates are of diminishing concern the smaller your loan and the shorter its term. That same 4% swing will translate to roughly a R2,600 monthly difference on a R1mil bond over 20 years.

Hassle them a bit - 14% really is a bit of a laugh - but don't stress about it too much.
 
Yeah, we've asked the guy to get back to the bank and see if they have wiggle room. Thanks everyone! Much appreciated.
 
Ask them to check with a different bank. Last year when I bought my car Nedbank MFC offered a better rate than my own bank Standard Bank. Was a small different but even R50 a month still counts.

Also ask about the life insurance and other cover they offer. Check up on the insurance your going to pay, shop around. All these small amounts add up to a couple of hundred rands at the end.
 
If you're planning on paying the car off earlier than the actual finance period just make sure you won't get penalised for it. Should say in the contract, I think. Also make sure any cash you put into it is used to decrease the principle debt, and not just the interest.
 
crilley said:
Yeah, we've asked the guy to get back to the bank and see if they have wiggle room. Thanks everyone! Much appreciated.
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Remember that the dealer gets a kickback from the bank on selling you finance. He will offer you the deal that gets him the biggest incentive.
If he doesn't come back with something decent, approach your bank and get a quote (you can usually get the answer within a couple hours of submitting the forms).
 
OrbitalDawn said:
If you're planning on paying the car off earlier than the actual finance period just make sure you won't get penalised for it. Should say in the contract, I think. Also make sure any cash you put into it is used to decrease the principle debt, and not just the interest.
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No penalties on settlement of loans < R250k, and maximum of 3 months' interest on loans > R250k, assuming you don't give notice of your intent to settle.
 
Some great advice in this thread.
Yes, 14% is high - shop around a little.

Also, since you're planning on paying the car off this year too - I don't think you're going to suffer that much with interest anyway - as you will be lowering the principle debt - which lowers interest fees (Not %)
 
HapticSimian said:
That's prime + 5.5%, which seems excessive. Keep in mind however that you're bound to get slightly higher rates as first-time buyers and on smaller amounts (don't know whether the former applies). Also keep in mind that a 4% swing on a R75k loan over 54 months would translate only to a difference of ± R150 on your monthly instalments.
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+1
 
go to the different banks and get quotes yourself
thats what I did in 2010 and settled ON 10% FIXED
 
Sounds high, but then again, I shouldn't be the one talking. I’m currently financing a car at a fixed 17.5%. The dealer gave me some shoddy excuse about the car being too old (2003) and was therefore a risk to the bank and myself…

Some sound advice is given above – you should definitely try shopping around yourself first. This is my first car so I won’t be making the same mistake again.
 
Jewpacabra said:
Sounds high, but then again, I shouldn't be the one talking. I’m currently financing a car at a fixed 17.5%. The dealer gave me some shoddy excuse about the car being too old (2003) and was therefore a risk to the bank and myself…

Some sound advice is given above – you should definitely try shopping around yourself first. This is my first car so I won’t be making the same mistake again.
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+1 but only in my case, the dealer convinced me at 21 freaking percent. He said its because I'm buying the car in my Dads name or something like that. When I realised i was being robbed, I started doubling my installment. May will be my final installment. Thank God
 
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