Car finance advice

[Mr K]

Hi,
I have searched through the forum and found some information regarding this but i am still bit confused.
I am looking for advice on car finance term.
I am buying a car for R218000. I am paying R50000 deposit.
1. what is the normal going interest at the moment?
2. Is it better to take short term(36 months) loan or long term(60 months) loan?
3. If i take loan for 60 months and pay it off in 36 months, will be paying more than what i woluld have paid for 36 months loan? Will there be any penlaties for paying the loan off earlier?

Thanks

 

[BTTB]

Hi,
I have searched through the forum and found some information regarding this but i am still bit confused.
I am looking for advice on car finance term.
I am buying a car for R218000. I am paying R50000 deposit.
1. what is the normal going interest at the moment?
2. Is it better to take short term(36 months) loan or long term(60 months) loan?
3. If i take loan for 60 months and pay it off in 36 months, will be paying more than what i woluld have paid for 36 months loan? Will there be any penlaties for paying the loan off earlier?

Thanks

As far as I know FICA prevents this, meaning if you take the Instalment Sale Agreement out over 60 months and settle it in 36 months the interest has to be recalculated.
All the vehicles I have have ever owned have been paid off over 36 months. It depends on what you can afford in regards to monthly repayments, the longer the term the less the monthly repayment, but you pay more in the end, you just don't miss it in the beginning, but after several years and the novelty of the new car has worn off, you will get tired of paying a car off year after year, especially one which the warranty has expired at the end of the 60 month term, the service plan has run its course and things start costing you.

Best rates from what I heard are from Prime plus. The only benefit in your case in taking up a longer term is you may get a better rate from the bank, in other words the shorter the term the higher the rate and vice versa. The sum of the loan also plays a part in the rate, the bigger the value the better the rate, but one has to qualify first.

Best maybe to phone the dealership and ask them these questions, they work with them everyday.

 

[Mr K]

Thanks. I will ask them on Monday. I was there this afternnon and did not think of all thes things at that time.

Does car loan also work as home loan?
For my home loan Interest is calculated at the end of the month on the balance left. i.e lets say for September 2012 the balance of home loan is 300000. Interest is charged on 300000 on 1st of October. If i pay 20000 into the home loan the next month they calculate the interest on R280000.

do they calculate the same way for car loan?

As far as I know FICA prevents this, meaning if you take the Instalment Sale Agreement out over 60 months and settle it in 36 months the interest has to be recalculated.
All the vehicles I have have ever owned have been paid off over 36 months. It depends on what you can afford in regards to monthly repayments, the longer the term the less the monthly repayment, but you pay more in the end, you just don't miss it in the beginning, but after several years and the novelty of the new car has worn off, you will get tired of paying a car off year after year, especially one which the warranty has expired at the end of the 60 month term, the service plan has run its course and things start costing you.

Best rates from what I heard are from Prime plus. The only benefit in your case in taking up a longer term is you may get a better rate from the bank, in other words the shorter the term the higher the rate and vice versa. The sum of the loan also plays a part in the rate, the bigger the value the better the rate, but one has to qualify first.

Best maybe to phone the dealership and ask them these questions, they work with them everyday.

 

[phiber]

Depends if you get a home loan or a higher purchase (don't even know if companies still do this/area allowed to). Whats your home loan rate? Why don't you take the 168k extra on that and pay just that loan?

 

[Centronix]

1. what is the normal going interest at the moment?
- about 11%

2. Is it better to take short term(36 months) loan or long term(60 months) loan?
- take it over 60 months. Lower instalments.

3. If i take loan for 60 months and pay it off in 36 months, will be paying more than what i woluld have paid for 36 months loan? Will there be any penlaties for paying the loan off earlier?
- no penalties. You wouldn't have paid more. The sooner you pay it off, the more you save on interest

 

[Mr K]

Thanks but i dont think my house is worth that(168000) more than i owe on the home loan. I think that will involve re registering of bond, etc..

Depends if you get a home loan or a higher purchase (don't even know if companies still do this/area allowed to). Whats your home loan rate? Why don't you take the 168k extra on that and pay just that loan?

 

[Mr K]

1. what is the normal going interest at the moment?
- about 11%

2. Is it better to take short term(36 months) loan or long term(60 months) loan?
- take it over 60 months. Lower instalments.

3. If i take loan for 60 months and pay it off in 36 months, will be paying more than what i woluld have paid for 36 months loan? Will there be any penlaties for paying the loan off earlier?
- no penalties. You wouldn't have paid more. The sooner you pay it off, the more you save on interest

Thanks. That means it is better to take loan over 60 months to get better interest rate and pay it off ASAP to save on interest.

 

[aloe]

Hi Mr K

I know this is an old thread, but just wondering what you decided in the end? I am also buying a car for the first time in 12 years and want to pay the lowest interest rate possible. Apparently banks give better rates the longer the loan. I'm thinking of financing over 60 months with a minimal deposit (to get the best rate) and then paying extra per month so that I pay it off quicker and save on interest. Is this what you did?

Thanks for the advice.