Wrong.

Unless your investment can yield your more than 5-6%, you are going to lose against the car loan interest.
And to achieve more than 5-6% in current investment environment is not easy task.

Most importantly, most people cannot even save enough, more money in hand, spend it, rather than using it for investment.
Forget about put the money in FD or saving, you are going to lose against your car loan interest.
Don't not think that car loan 2.xx% is your effective interest rate. You are not paying 2.xx% interest, even your saving give you 3.5%, you still lose against it.

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Added on February 19, 2012, 10:38 pmCar loan work like that.
You borrow 50k. If the 50K interest is 3%, and for 5 years, means 50k x 3% x 5 years = 7.5K interest for the whole loan period (average 1.5K pa).

First year, you loan 50K, paid 1.5K, yes it is 3%.
But second year, you already down 10K, left 40K, you still being charged 1.5K. 1.5/40 = 3.75 (no longer 3%)
Third year, loan left 30k, still pay 1.5K interest, 1.5/30 = 5%.
4th 1.5/20 = 7.5%

So the longer you drag the loan period, the more happier the bank is.
That's why the longer loan period, bank can give more lower rate.


This post has been edited by cherroy: Feb 19 2012, 10:38 PM

I just showed the illustration of published rate of car loan is not the effective rate.

A 3 % car loan interest is not 3%.
You are actually paying 5%, and 7% for your loan on after 4th year, only first year you are paying 3%.

For the loan money of 100K, you paid 15K for the whole tenure.
Equivalent to 3K per year.
First year you apply loan you owe bank 100k, pay 3K, yes 3%.
But on second year, you already paid off 20K, you only owe bank 80K (not 100K), you are still paying the same interest 3K per year, it is already not 3%.

Who fail to see the real picture?

This post has been edited by cherroy: Apr 2 2012, 04:40 PM

I am explaining how to find out or to see the effective or real car loan interest is.

I am not telling how to calculate how much monthly repayment is.
Seem like someone don't understand, what being highlighted.

This post has been edited by cherroy: Apr 3 2012, 11:34 AM