Again, car loan is simple interest. 2% -> 4-5% in effective interest.

3.75% effective actually.

Most car loans are around 3% flat interest, effective is around 5-6%.

2% is most probably a promotional rate or very expensive cars

Just got my loan approved

New car, continental brand
Loan for RM260k
Down-payment - RM10k++

HLBB - 9 years, 2.23%
Effective interest rate is 4.16%

Good rate, too bad local cars will never get this kind of rate.

They can afford to give lower rate because of higher sum borrowed/foreign cars can subsidize due to higher cost.

Sitting on a huge chunk of cash but decided to take loan and max it out at 9 years simply because I can confidently get about 8%~10% returns per annum over a 9 years horizon. If bullish, then will be anything between 10%~14% per annum.

Doing the maths, if I were to buy the car today with cash (RM270k), after 9 years, I would have RM0k and a car that is worth probably RM30k.

On the other hand, if I were to pay down-payment RM10k and invest the balance RM260k, which, let's say, generates an average of 9% returns per annum, while at the same time, withdrawing RM2.8k++ every month from this investment to service the loan, after 9 years, I would still have RM103k and a car that is worth probably RM30k.

Both scenarios, I take it that the RM270k is gone. One I pay upfront while one I pump into an investment vehicle and let it run by itself with the auto-debit set in place to service the loan.

Can I afford to buy the car outright in cash? Probably yes, since I do have that amount in cash.

Do I want to buy the car outright in cash then? Probably no, since I'll be better off taking a loan.

Only thing that is impacted is my DSR, since I'm utilizing a fair bit of my 'financial ability to take a loan'. But that aside, seems like it makes perfect financial sense to get a loan in my scenario.

Just my 2 cents.

Im willing to bet, of that 1% ppl who invest their extra cashflow, 80% lose their money.

The forumers here have made the point.

For those that are reading, it's about how you manage your cashflow over the entire debt tenure.

If the tenure is longer, generally, it is better, if you can use the money for a better return, which at the end will eclipse the c.3% p.a. interest.

Paying 3 - 5 years seems smarter but you actually lose at opportunity cost, which a lot of people don't utilize because not everyone is rajin to use their money to make money.

Now on a side note, i'd prefer X50 > Honda city lel cheers guys

In here many people saying effective interest rate vs flat rate. But they forget, if you serve the loan follow the loan tenure the effective interest actually do not have any harmful to you. Only if you plan to early settlement. For example, 7 years loan you settle it at 5th years, then you are totally losing. This is where the effective interest rate kick in. Dont keep mention effective interest rate if you are paying installmently follow the loan tenure, no early settlement. 100K 2% 9years it still pay 18K interest for 9 years tenure. But if you do early settlement, the interest you will saving is actually very less. Please using effective interest rate in the right way. haha, it is totally different to house loan. Car loan you do early settlement after paying installment for more then 4 to 5 years is actually not smart.

Sometimes people settle their loan not to save interest, but to have a peace of mind or to free up their quota for another purchase.

Being debtless > being calculative over interest saved for early settlement

If honda or toyota 9 years make sense. If bmw 5 years make sense


For me car loan usually is 5 year max. Anything above that is just unnecesary purchase. Banks like 9 year loaner and not 5 year loaner for a reason

What you fail to take note is people compare it directly to home loan or investment returns.

Car interest 2.8%.
FD: 4%
Home loan 3%
"Better take 9 years and dump into FD, or dump into my home loan."

This is where the problem lies.

For me 5years tenure, monthly installment <1k, using the car for 10years replacing it

Another Helang T1

huh?

ok, let's be honest here.
the only thing that matter is the downpayment.

if you can afford to push down the monthly commitment to improve your cashflow, that is a WIN. Whether if the cashflow is for your investment or lifestyle, either way it's fine. You get to enjoy life as you go.

All those saving bit of interest here and there doesn't really matter in the bigger picture unless you're talking about cars that cost more than a regular house.

Because if you're paying so much for your car monthly loan (especially those on 5 years), you might as well buy a house.

Paying 3-5 years is not "seems smarter" for those who are not rajin to use their money to make money. It is smarter, because otherwise their money would be sitting in the bank earning peanuts while their 9 year loan continues to cost them more interest.

take 9 years...
pay it off in 5.

I could have worded it better back then, but you sir made the point better than me! Thanks

LOL. Don't give bad advice please.