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Loan Tenure


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#1
gregy

Posted 01 February 2011 - 01:26 PM

gregy

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Hi guys,

Over the years or can I say throughout the entire history of AW I'm sure you've come across many ppl who advocate taking short loans and why anything over a 5 yr tenure means you really can't afford the car. Well, lately I did some rough calculations and I've found that there really isn't a good enough reason to tie your money down just to shorten your "sentence" LOL... Here's why:

Assuming:
Car's original price = RM97,800 (Forte 2.0 FL)
Loan taken = RM86,000 @ 2.7% PA
Car's price after 5 yrs = RM50,000
Owner changes car after 5 yrs

Borrower A takes 5 yrs = RM86,000 x 1.135 = RM97,610, or RM1,626.80 / month

Borrower B takes 9 yrs = RM86,000 x 1.243 = RM106,898 or RM989.80 / month


After 5 yrs, selling the car at RM50,000:
Borrower A gets RM50,000
Borrower B gets (RM50,000 less RM43,500* settlement to bank) = RM6,500 (Wow! Big difference eh?)
*The amount of RM43,500 was taken from AW's loan settlement calculator, rounded up.


In reality, Borrower A paid an extra of RM637.00 per month vs Borrower B, amounting to:
(RM637 x 60) = RM38,220

So, his actual nett gain is:
(RM50,000 less RM38,220) = RM11,780

Hence, Borrower A's tenure advantage over Borrower B is only:
(RM11,780 less RM6,500) = RM5,280

So, in order to realize a nett gain of RM5,280 after 5 years, Borrower A has to fork out an additional RM637 per month. In other words, when considering a new car, you must ask yourself, do you have the willpower to set aside RM600+ a month in your bank while enjoying a lower repayment thus less stress, or would you prefer to take a short tenure and force yourself to pay that extra money to the bank or they will tarik your car LOL...

IMO people with good financial discipline should take a long tenure and manage their funds themselves.

Happy CNY and Happy Holidays!
There are no lousy cars. Only better cars.

#2
scenic

Posted 01 February 2011 - 02:32 PM

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Quite a good analysis. If we can make use of the RM637 per month for something to yield more than the interest accrued for the additional 48 months (108 months in total) then it is worthwhile. You got a point there.
director's choice

#3
GuyM

Posted 04 February 2011 - 01:27 PM

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Have u thought abt the nett cash at hand of Borrower A (RM50k) vs Borrower B (RM6500)? With more cash at hand, Borrower A will be able to afford a better car as downpayment vs Borrower B upon upgrade? In addition, typically the interest for 5 yrs is slightly lower compared to longer tenure though the impact is minimal for such loan amount.

On the other hand, with a saving of $637.60, B can use that to pay for another property, rent it out, and sell out after sometime & realised the profit (hope the property appreciates) but continue to use car of less than RM100k price range.

#4
darreltian

Posted 07 February 2011 - 01:32 AM

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QUOTE (gregy @ Feb 1 2011, 01:26 PM) <{POST_SNAPBACK}>
Hi guys,

Over the years or can I say throughout the entire history of AW I'm sure you've come across many ppl who advocate...

So gregy, u booked Forte FL? smile_big.gif

#5
gregy

Posted 08 February 2011 - 12:03 AM

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QUOTE (darreltian @ Feb 7 2011, 01:32 AM) <{POST_SNAPBACK}>
So gregy, u booked Forte FL? smile_big.gif


Not yet. Waiting for reply from SA on the procedure of switching bookings from Pug to Forte smile.gif
There are no lousy cars. Only better cars.

#6
darreltian

Posted 09 February 2011 - 11:57 AM

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QUOTE (gregy @ Feb 8 2011, 12:03 AM) <{POST_SNAPBACK}>
Not yet. Waiting for reply from SA on the procedure of switching bookings from Pug to Forte smile.gif

Welcome abroad....do u mind sharing which pug model u're cancelling?

#7
gregy

Posted 09 February 2011 - 09:17 PM

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QUOTE (darreltian @ Feb 9 2011, 11:57 AM) <{POST_SNAPBACK}>
Welcome abroad....do u mind sharing which pug model u're cancelling?


Pug 308 Turbo 6-sp. Now with news of the 308 facelift coming in April, even more reason to cancel my booking lol smile.gif
There are no lousy cars. Only better cars.

#8
scenic

Posted 10 February 2011 - 11:49 AM

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QUOTE (gregy @ Feb 9 2011, 09:17 PM) <{POST_SNAPBACK}>
Pug 308 Turbo 6-sp. Now with news of the 308 facelift coming in April, even more reason to cancel my booking lol smile.gif


If U really want the facelift 308 then, you don't have to cancel your order.
director's choice

#9
darreltian

Posted 10 February 2011 - 11:58 AM

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QUOTE (gregy @ Feb 9 2011, 09:17 PM) <{POST_SNAPBACK}>
Pug 308 Turbo 6-sp. Now with news of the 308 facelift coming in April, even more reason to cancel my booking lol smile.gif

Wow... i am contemplating switching to Koup if it is priced at 115K
.... fing01.gif dun tell my wife....smile_tongue.gif

#10
flee

Posted 10 February 2011 - 12:47 PM

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No real B&W answer to this question. The person who finished paying his car loan after 5 years will have spare cash the next four years (assuming he is keeping his ride) which he can also use for investment. So its really up to the individual to decide. Each person has his own financial and risk profile. So they should decide on what is their priority and then make the decision that is correct for them.
Regards,
Flee