Fixed or Linked?? Vehicle finance

R

rodga

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Hey everyone

I got a few quotes of which the best seems to be a linked rate of prime-1% or fixed @11%
im not sure which will be better? fixed or link
both are over 60 months, any advice? and why?

im not too clued up bout all the financial stuff etc so any help will be welcom

thanks
much appreciated
 
I am buying linked at present, and Wesbank actually advised me to go that route based on the current climate. Prim less one is a great rate, I would go for it...even if Prime does go up in the next 60 months, it is unlikely to shoot through the roof, so you will be saving big time by going linked.
 
rodga said:
Hey everyone

I got a few quotes of which the best seems to be a linked rate of prime-1% or fixed @11%
im not sure which will be better? fixed or link
both are over 60 months, any advice? and why?

im not too clued up bout all the financial stuff etc so any help will be welcom

thanks
much appreciated
Click to expand...
They are balanced to be equal on a risk adjusted basis with current knowledge available, so neither is inherently better despite what people tell you.

The deciding factor therefore is your own attitude towards risk.
 
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Fazda said:
I am buying linked at present, and Wesbank actually advised me to go that route based on the current climate. Prim less one is a great rate, I would go for it...even if Prime does go up in the next 60 months, it is unlikely to shoot through the roof, so you will be saving big time by going linked.
Click to expand...

u mind if i ask what rate u getting from them?
 
HavocXphere said:
They are balanced to be equal on a risk adjusted basis with current knowledge available, so neither inherently better despite what people tell you.

The deciding factor therefore is your own attitude towards risk.
Click to expand...

thanks, makes sense
linked it is, lol
 
so thats prime+2%

i thought youd get a better rate? arent you in the industry? thought u could pull some strings...
 
rodga said:
so thats prime+2%

i thought youd get a better rate? arent you in the industry? thought u could pull some strings...
Click to expand...

No, I couldn't pull any damned strings at the time, and at that particular point it was a good rate.
 
As Havoc says its about your risk appetitte. 11% fixed or 9% now and possibly 8.5% after tomorrow. What you also have to ask yourself is what is the max you cann afford to pay and where do interest rates have to go to before you are there (yes rates will go up some time even if they are cut tomorrow).
 
milomak said:
As Havoc says its about your risk appetitte. 11% fixed or 9% now and possibly 8.5% after tomorrow. What you also have to ask yourself is what is the max you cann afford to pay and where do interest rates have to go to before you are there (yes rates will go up some time even if they are cut tomorrow).
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Just a warning, which this post has just reminded me of.

Be very careful of going linked if you are stretching yourself to pay that amount off. Remember banks will usually approve an instalment rate of up to 25% of your gross salary - so if you are earning a gross of 20k they will approve you up to 5k. Sounds magic and suddenly you can see yourself driving off in your dream car, but please, please, please do your homework, and see that you aren't pushing yourself over the limit. Personally I would never finance a car where the instalments are anything more than 10 to 12% of my gross. In other words, if you are earning 20k try and keep your instalment below 2500...go higher than that and suddenly Insurance, Bond repayments Eskom, you name it and you've got nothing left for food!

As I've said before, I am linked, and am looking forward to a possible drop today - but then my repayments are well within my budget so if it doesn't drop, it's not the end of the world.
 
Fazda said:
Just a warning, which this post has just reminded me of.

Be very careful of going linked if you are stretching yourself to pay that amount off. Remember banks will usually approve an instalment rate of up to 25% of your gross salary - so if you are earning a gross of 20k they will approve you up to 5k. Sounds magic and suddenly you can see yourself driving off in your dream car, but please, please, please do your homework, and see that you aren't pushing yourself over the limit. Personally I would never finance a car where the instalments are anything more than 10 to 12% of my gross. In other words, if you are earning 20k try and keep your instalment below 2500...go higher than that and suddenly Insurance, Bond repayments Eskom, you name it and you've got nothing left for food!

As I've said before, I am linked, and am looking forward to a possible drop today - but then my repayments are well within my budget so if it doesn't drop, it's not the end of the world.
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Agreed!

Imagine that, R20k and you can only really afford R2500....that Chery territory.....maybe not even....I'm a teacher with an MSc on R9k gross. I drive a 17 year old Merc....:D....can only dream of a R20k gross....:erm:
 
very true
in fact they said the limit was 30% of your gross salary
 
the graduate said:
Agreed!

Imagine that, R20k and you can only really afford R2500....that Chery territory.....maybe not even....I'm a teacher with an MSc on R9k gross. I drive a 17 year old Merc....:D....can only dream of a R20k gross....:erm:
Click to expand...

Sadly, one of the reasons I'm no longer in the teaching profession...:(

R2500 will get you a pretty decent car, and if you have a decent trade in, it can get you a very nice car indeed.
 
My theory is to go linked and pay a bit extra every month for the first year or so. (Or put in a lump sum if u can)
That way even if the interest rate skyrockets, it'll take months to years to "catch up" to the fixed rate you would've been paying during that time. Also, your total payment over the full term will be much less.
In fact, even if you don't put any extra money in, your total payment will be much less (obviously); and even if the interest rate climbs, your total outlay will take a while to "catch up". Your monthly payments on the other hand, could be a different story. So it does depend how much head room you have for installment increases.
What it comes down to for me, though - is that two percent is a LOT on a loan over 4 or more years. That's why the banks and finance companies are happy to give you a fixed interest rate - it usually works out better for them
 
ok, so due to the rate cut last week, the linked rate is prime - 1% = 8,5%
but they also dropped the fixed rate from 11% to 10,5%

im leaning more towards the fixed one - what u guys say? i think its a better long term solution...
 
I'd take fixed. Rates haven't been this low since 1970 or something (was mentioned in rate speech). Maybe we'll get another minor cut, but I reckon it can only go up from here.
 
I got a bad rate from Wesbank - 12% linked or 12.5% fixed. I went for fixed because my house is linked (prime -2%) and if rates go up I do not want my car and my house to start killing me.
 
if i put a smaller deposit fixed is now 10,25%, ie went down 0,25%
and linked went up to 10%, ie prime + 0,5

htf does that work?
 
rodga said:
if i put a smaller deposit fixed is now 10,25%, ie went down 0,25%
and linked went up to 10%, ie prime + 0,5

htf does that work?
Click to expand...
The algos they use are closed, so nobody knows. Its also not purely computed, they use a bit of analysts gut feel input too, thought I suspect its mostly forward rates.

I suspect in your case: Smaller deposit = Bigger amount loaned = Different category of loan = lower rate
 
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