Vehicle Finance Question

Speedster said:
So how would you calculate that? Surely calculating it daily is the same as compounding it daily?
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No, when you compound it you add it to the balance outstanding, so from that point you pay interest on the interest as well. Your outstanding balance doesn't change daily - it's calculated once a month.
 
Sinbad said:
No, when you compound it you add it to the balance outstanding, so from that point you pay interest on the interest as well. Your outstanding balance doesn't change daily - it's calculated once a month.
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ah. That makes sense. Calculate the interest each day and add it all together once a month.
 
Also keep in mind that interest rates are at record lows and are unlikely to remain here for long. People constantly calculate what they can afford today, not thinking about tomorrow. What if we see another series of IR hikes taking prime up 5%. Then can you still afford it? Buying a R500K car when interest rates are 5% higher adds a lot to the monthly payments. On the other hand if you are buying cash then higher rates help you as your savings earn better interest.
 
I just checked and my settlement amount is about R10K less than my outstanding amount with 26 months to go.

My savings are generating about R500 of interest per month. Which will work out to more than R10K after 26 months.

It seems that leaving my savings alone and continuing to pay the installments works out better :confused:

Unless they miscalculated my settlement amount because about a year ago my settlement amount wasn't that much more than it is now considering the installments paid Inbetween.
 
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abzo said:
I just checked and my settlement amount is about R10K less than my outstanding amount with 26 months to go.

My savings are generating about R500 of interest per month. Which will work out to more than R10K after 26 months.

It seems that leaving my savings alone and continuing to pay the installments works out better :confused:

Unless they miscalculated my settlement amount because about a year ago my settlement amount wasn't that much more than it is now considering the installments paid Inbetween.
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Would you need to use ALL your savings to settle your car?
Doesn't sound right, unless the interest on your savings account is higher than the interest on your car loan.
 
No I wouldn't need to use all my savings. About 40% of it.

I just don't understand why the settlement amount is so high compared to what it was a year ago. I'm guessing it works out much much better to settle really early in your finance period?
 
The earlier you settle the more interest you will save.


Dependant on rate of interest vs the rate of interest your savings appreciate by....


In my case im paying 8.5% interest for vehicle vs 3-5% on most savings accounts( money market;call accounts etc)

I will save alot more by freeing the car.


PS. dont forget the service fees that are R57/month ......

In most cases the NCA doesnt allow finance houses to charge any penalties to settle early.
 
abzo said:
No I wouldn't need to use all my savings. About 40% of it.

I just don't understand why the settlement amount is so high compared to what it was a year ago. I'm guessing it works out much much better to settle really early in your finance period?
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In the initial years of the agreement, you're paying mostly interest. Your capital reduces more dramatically at the end of the agreement.

If you'll only use 40% of your savings, your income will still be R300 (ie, losing R200). R200 over 26 months is R5200 in lost interest, vs R10k in saved interest.

Settle the car.
 
SinghDude said:
PS. dont forget the service fees that are R57/month ......

In most cases the NCA doesnt allow finance houses to charge any penalties to settle early.
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Not true. Any agreement for over R250k is deemed a large agreement and is subject to 3 months notice of intention to settle.
 
Just paid it off, a moment of silence to my savings account.

This is great http://www.amortization-calc.com/, helps you work out your settlement value.

Only tip I can give you guys is to pay it off ASAP. I would have saved R8k if i paid it 4 or 5 months ago.
 
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