U are better off utilizing the 35k by putting it into your main savings to finance another house.

rm115k, can pay down payment for small condo lo, better ROI right

I need to do some calculation..

Does the money kept in account, or FD, or ASB?
I prefer loan to the max, cause the money can be use for better things...in sense of business capital...

Are you telling people to keep cash in FD and go take car loan?
You better think again.

You would regret keeping your cash in FD and go take a car loan.
The longer your car loan, the more u will regret.

Actually it's the opposite !

You don't even need calculation to know which is better. All that you need is business sense !

The banks take your FD money and loan it to people as car loan. On FD side they give out interest, on the loan side they collect interest.

Banks are not charity organization. They have to make money.

So business sense tells us FD side is smaller money than the loan side.

Seeing so many financially uneducated people here, I think Bank Negara should set a ruling that banks which give out auto loans must also alert the borrower how much effective interest they are charging

Every now and then, there are new people appear here who thought car loan interest of 2.5% is better than FD 4%. It just showed that banks have done a successful job to "con" their customer into believing car loan is a cheap loan

Common sense, will bank pay out 4% FD interest rate, and then collect just 2.5% interest ? 

   
here is a quick answer: see this online flat rate calculator http://loanstreet.com.my/calculator/flat-t...rest-calculator

Put in 2.5% and any number of years you like... the effective rate is more than 4%.

Flat rate: This is how the interest is calculated in car and personal loans.

Effective rate: This is how the interest is calculated in fixed deposit and housing loans.

Get it? The rates are NOT the same. To compare them, first, you need to convert the flat rate to effective rate.

My friend. You are forgetting the time value of money. You pay rmX every month. Not RM112500 at the end.

Put it another way, rmX every month in FD at 4%p.a. for 5 yrs does not yield rm112.5k

Suggested reading: http://loanstreet.com.my/learning-centre/i...e-flat-interest

when you see so many disagree with you, you should be smart enuff to know you are wrong. Supersound eavesdropping there?

but the way, you retorted  "..i have found that business sense is rarer than you would expect...............i have found that common sense is rarer than you would expect.......", you sounded like u are very clever.
Of course there are many reasons why people who are cash rich, still take car loan.

But that was not the answer people are looking for when they come  ask whether they should keep own cash
and take car loan that seems cheap , appears lower than FD rate!
They want us to assure them yes, they can make some money out of that car loan.

To them the answer should be a resounding NO.
If they can make money out of it, they wouldn't be asking that Q here in the first place.
just see what @sootienann thinks.

1 year don't know how many times the same question crop up in this forum. I also lazy to explain liao

By all means genius, nobody stop you to become a fool 

If you count like this, then it is financial ignorance already. No offence.

Banks won't loan out money at a interest rate lower than FD rate.
If so, banks are making a losing business already.
Banks are not "stupid" to do this,

Please read what is EIR for a 2.5% car loan.

May be I should pinned this explanation, as this question has been popped up again and again.
Seems like many still do not understand what is flat interest rate of a term loan.

Flat interest term loan typically car loan, interest already counted before hand for the total tenure.
A 3% car loan interest :

Remember you won't able to win against Banks by taking loan to put in FD.
FD interest rate is the cost of bank funding, if banks do not impose loan interest higher than FD, then they are doing charity work already.

You have 100k FD now.
But you don't have 100K at year 2, year 3 already as you need to draw down your FD to pay your month installment.

So the FD interest of 20k for 5 years is wrong.

The one doesn't understand is you, not others. 

Assuming 100k FD at 4%.
Interest that can generate for you with car monthly repayment 1875.

(as compared to pay off in cash)

1st year
second month, you left with 98,125 that can generate 4%
third month, left 96,250

Second year, you are left with
77,500 that can generate 4%.

In the final 5th year, the interest will be so little as you are left with 10K in the FD.

The further it goes, the less interest can be generated.
So you do not generate 4K per year from the 100K.
In fact, the final 5th, the interest can be generated is less than Rm400.

I think i know what are they talking about. Take loan 100k say 5 years. Put 100k into FD at 4% for 5 years. The FD principal and interest cannot be touch. Then pay off the car loan using salary.

Non finance trained people will find it very hard to grasp the concept of Time Value of Money.

let me explain:

Lets say I put RM100K in a 12 mth period FD at 5% p.a, one year later my profit is RM 5,000 and a ROI of 5%. Yay! Happy right?

Then If I withdraw it out and do nothing... in the second year the annualised return becomes 5 / 2 = 2.24% p.a. but the profit still remain 5%.

3 years later, the ROI is still 5% but now the annualised return is  (5)^(1/3) = 1.71% p.a.

4 years later, the ROI is still 5% but now the annualised return is (5)^(1/4) = 1.5% p.a.

So you see, in real finance, we take in the concept of time and the cost of doing nothing is factored in.... hence we say Time is Money, we really mean it... mathematically!

So, if you put in FD and wait and time the market.... you will lose your annualised return (we called it Internal Rate of Return, symbol is xIRR).

Back to the question of taking a HP versus buying cash.

Usually, HP interest rate of 2.8% to 3% when converted to effective interest rate (aka Time Value of Money concept) will be around 5.0% p.a. (xIRR)

If you take the loan instead of paying cash and used the money instead to  put your cash in FD @ 4% p.a. = you are a sor hai!

If you take the loan instead of paying cash and used the money instead to  put into real investment and say get 10% p.a = you are a W1NN4R!

Understand?

Xuzen

The sor hai still thinks everyone else here is a SOR HAI .he is very clever!

I salute everybody who take their time and patient to show mathematical calculation to educate a forummer here, despite his rudeness. You guys are

For me, I don't waste time on such people. I hope he continue to practise what he "believe" and let banks make his money