Vehicle repayment

[solantis]

Can someone help me understand how the bank calculates you repayments on a vehicle? As an example a vehicle costs R200,000 (208,635 including registration) be to taken over a 5 year period with a fixed rate of 17.25% comes to a total of R244,625 but yet you end up paying R325,000 by the end of the 5 year period?

 

[ArtyLoop]

its called the bank profiteering from you - Compound interest I think
The difference is "service fees" and other hidden charges.

 

[KleinBoontjie]

17.25? why that so high?

 

[supersunbird]

Can someone help me understand how the bank calculates you repayments on a vehicle? As an example a vehicle costs R200,000 (208,635 including registration) be to taken over a 5 year period with a fixed rate of 17.25% comes to a total of R244,625 but yet you end up paying R325,000 by the end of the 5 year period?

Isn't the 17.25% per year? So the first year you pay R35 990 in interest (which is where you are getting your R244 625: R208,635 + R35 990). The other 4 years interest is where the R325 000 in total payments come in.

So the sooner you pay off the vehicle, the better.

 

[Zuner]

Can someone help me understand how the bank calculates you repayments on a vehicle? As an example a vehicle costs R200,000 (208,635 including registration) be to taken over a 5 year period with a fixed rate of 17.25% comes to a total of R244,625 but yet you end up paying R325,000 by the end of the 5 year period?

Your calculation is for 1 year of interest on the capital amount instead of 5 years. That's why its more. but remember as you pay monthly the outstanding capital gets reduced so the amount of interest you pay gets reduced a little every month. That's also why you can't just multiply the interest by 5 cause its ever changing.

 

[Zuner]

Isn't the 17.25% per year? So the first year you pay R35 990 in interest (which is where you are getting your R244 625: R208,635 + R35 990). The other 4 years interest is where the R325 000 in total payments come in.

So the sooner you pay off the vehicle, the better.

^This

 

[solantis]

Your calculation is for 1 year of interest on the capital amount instead of 5 years. That's why its more. but remember as you pay monthly the outstanding capital gets reduced so the amount of interest you pay gets reduced a little every month. That's also why you can't just multiply the interest by 5 cause its ever changing.

So would that apply to a fixed interest rate as well? The amount you pay gets reduced every month?

 

[supersunbird]

So would that apply to a fixed interest rate as well? The amount you pay gets reduced every month?

No, the interest amount you pay lowers slightly, while capital payback increases slightly (at the beginning). You will keep paying the same monthly installment every month for 60 months (unless you make a lumpsum deposit against the capital amount owing and keep the payment term the same).

Your last payment at month 60 would be almost all capital and very little on interest.

 

[Mike Hoxbig]

So would that apply to a fixed interest rate as well? The amount you pay gets reduced every month?

Fixed interest rate means that your interest rate doesn't change with the repo rate. It has no effect on your installment - that stays the same every month. Unless you pay an additional sum into your vehicle account, and capitalise it - then you can request either a reduction in term (keeping your installment the same), or a reduction in your installment (keeping your term the same)...

 

[Drifter]

It's 17.25% P/A. Not once off.

 

[SauRoNZA]

It's 17.25% per annum but calculated per day on the outstanding capital balance.

Also if you accept that rate you are ****ing nuts.

Fixed interest just means the rate is fixed...not the interest. Probably also why it's so high as it's normally +2% of the linked rate.


Ask for a linked quote too. In the last decade or so interest rates have never fluctuated by 2% or more over an entire period so volunteering for a higher fixed rate is silly as you'll be paying more from day one.

 

[supersunbird]

It's 17.25% per annum but calculated per day on the outstanding capital balance.

Also if you accept that rate you are ****ing nuts.

Fixed interest just means the rate is fixed...not the interest. Probably also why it's so high as it's normally +2% of the linked rate.


Ask for a linked quote too. In the last decade or so interest rates have never fluctuated by 2% or more over an entire period so volunteering for a higher fixed rate is silly as you'll be paying more from day one.

Probably a first time buyer.

 

[Zuner]

OP this will help you understand: (i just used a bond calculator)




By the end it looks like so:

 

[SauRoNZA]

Probably a first time buyer.

Yup.

But asking the right questions at least. The sooner someone understands compound interest the better.

 

[rietrot]

The interest rate you see is always a yearly rate, but banks calculate that on a daily bases and compound it mounthly.

 

[handyman007]

17.25%!!!

 

[ArtyLoop]

17.25%!!!

Usually given to those with poor credit rating, or deemed high-risk

 

[Zukat]

Please dont tell me that you accepted that rate...

 

[solantis]

Not yet.. So i should negotiate down to 12%?

 

[AchmatK]

Yup.

But asking the right questions at least. The sooner someone understands compound interest the better.

Compound interest should be understood way before you even matriculate, never mind when applying for a loan on your first car.

WTF are they teaching kids in school?