so after you pay for one year, following year 2.9% is based on outstanding or total loan amount?

nvm i tell you, it is based on total loan amount. Meaning it is not 2.9%.

Now i have no more doubt why banks are making so much money

That's why, as i said. bank use EIR for back end. coz your contract with them is 5yrs example. your interest for 5years will be 5 x 2.9%. if second year you want to void contract and expect bank only earn you 2.9% for the first year. then that's not the way.

2.9% per year is as what bank already told you. and you need to fulfill the contract maturity.

try to check your own car loan.

if you said u want 5years. so 5x2.9%. is that the total amount you pay??

it is not effective, read the example given by cherroy.

They charge you 2.9% on 100k for 5 years. first year already paid 20k yet they want to charge 2.9% on 100k.

Of course i know it is agreed, the arguement is you gain less on FD. Not more as you stated earlier.

I am not arguing that the bank is wrong.

Here is my calculation on buying with Cash or take loan

But am using 50k example for easy calculation

Cash scenario
50k nett nett for the car

Now is comparison between putting 50k into FD at 4% per annum and taking a loan 2.9% per annum for 7 years

If you take 2.9% for 7 years based on 50k loan amount (Let's say it is 100% financing)

RM 1450 interest per year x 7 years = 10150

Total principal + interest = 60150

Total monthly commitment is 716.07
Total payable month = 7 x 12 = 84 months

Now if that 50k is slotted into FD with 4% per annum, and withdrawing 716.07 a mth for installment

Using Time Value Money
Present Value = 50,000 ( Means deposit 50k into FD)
Payment = -716.07 (Withdrawing every month for installment
Future Value = 0 (Complete withdrawal to pay hire purchase)

Annual Rate = 4% (FD 4% interest payment to you)

Mode = Beginning (Hire purchase pay in the start of the month, so withdraw on starting of the month)

In the end, calculate Period that can withdraw until Future Value = 0 (Means complete withdraw)
Period = 79.31, or 79 months

So.. means if u take loan, and money put FD.. u are still losing out 5 mths of installment
5 months x RM 716.07 = rm 3580.35

So u still pay extra RM 3580
However, this is based on theory and calculation.
Real situation, bank doesn't allow partial withdrawal of FD of RM 716.07, and many more kuci kuci twist and turn..

Do be informed that if you take hire purchase, need to sign facilities agreement, stamping and preparation also cost approx 1k.
Just my 2 cents calculation to justify cash purchase and putting in FD and take loan.

*** I hope my TVM calculation input data is right ** Hahaha.. cuz i am only 4/5 bucket water

bone,

In the end, calculate Period that can withdraw until Future Value = 0 (Means complete withdraw)
Period = 79.31, or 79 months

i am lost count here!! how to get 79.31mth ar?? can help me understand!!

I didnt calculate but should be inclusive of 4% interest gain yearly from your FD principal.

bone,

In the end, calculate Period that can withdraw until Future Value = 0 (Means complete withdraw)
Period = 79.31, or 79 months

i am lost count here!! how to get 79.31mth ar?? can help me understand!!

with that 4%pa compounded for 7yrs/$716.07, also cannot get 79.31mth leh!!

with that 4%pa compounded for 7yrs/$716.07, also cannot get 79.31mth leh!!

ok..

this scenario, we must talk about the buyer got 50k cash, but yet want to take loan to buy a car with loan principal 50k.

So to work out the calculation.. we must define the monthly payment of the hire purchase loan..
It works out to be paying RM 716 for a period of 84 months (for this case of 7 years)
So if we want to see whether charging up the FD with 50k cash without any other external fund, will this set up be able to clear the hire purchase or not.

So that is why we start out with 50k place in FD.. say 4% per annum.

So ur hire purchase need to pay every month.. hence u need to withdraw RM 716 from ur FD to pay the hire purchase.

While ur principal will earn 4% interest.. ur principal will keep reducing because u are cashing it out every month to service ur Hire Purchase.

So.. based on the action of withdrawing RM 716 every month, you can withdraw 79 times to tahan 79 months of hire purchase.

But u must remember, u took a loan for 84 months..
So there is a 5mths period where you will have no more fund in the FD acc.

How I derive 79 months is from the calculation using Financial Calculator with the info provided.

Present Value = 50k (U put FD ma...)
Payment = - 716 ( minus, because u withdraw money out)
Future value = 0 (Because u keep withdraw until finish to pay the hire purchase.. so future will be 0)
Interest = 4% ( FD acc give your principal 4% P.A)

So you calculate period..

So period = 79.xx, or 79 months

That is how i get 79

But what if say a person have rm50k cash, put fd at 4.2%/year. Fd will not be touch. Fd Interest remains the same every year.

He then take rm50k car loan at 3%/year for 5 year from another bank. He is going to pay the loan using deduction from monthly salary.

At the end of 5 years, he paid finish his loan. He withdraw fd with the interest, will he make a loss or make a profit?

Sorry. I am still blur

But what if say a person have rm50k cash, put fd at 4.2%/year. Fd will not be touch. Fd Interest remains the same every year.

He then take rm50k car loan at 3%/year for 5 year from another bank. He is going to pay the loan using deduction from monthly salary.

At the end of 5 years, he paid finish his loan. He withdraw fd with the interest, will he make a loss or make a profit?

Sorry. I am still blur

Then this is not a fair comparison already

U are comparing on

bank charge u hire purchase interest of 50k

while u are taking FD interest and monthly contribution to jack up ur profit..

It is like taking 50k and 110k to compare..

not a fair comparison at all

Guys how about the scenario I posted?

I know is not a fair comparison. But how's the end result? Will one be able to get profit by doing that?

I cannot say it is profit or loss..

I only can say.. u did not get the max efficiency from your money value based on the scenario

But what if say a person have rm50k cash, put fd at 4.2%/year. Fd will not be touch. Fd Interest remains the same every year.

He then take rm50k car loan at 3%/year for 5 year from another bank. He is going to pay the loan using deduction from monthly salary.

At the end of 5 years, he paid finish his loan. He withdraw fd with the interest, will he make a loss or make a profit?

Sorry. I am still blur