How Much Car Down Payment to Pay
What is the best way to determine how much Car Down Payment to pay? Pay as much as we can? OR borrow money from bank, family or friends as much as we can?
CASE STUDY:
PERODUA MYVI SE ZHS – MYVI SPECIAL EDITION (AUTOMATIC)
SCENARIO 1: PAY MAXIMUM DOWN PAYMENT WITH YOUR CASH
- Metallic: RM53,400
- 10% Down Payment RM5,340
- 90% Car Loan: RM48,060
- Car Loan Tenure: 9 years
- Car Loan Interest: 3.65%
- Monthly Installment: RM591.18
SCENARIO 2: BORROW MAXIMUM CAR LOAN FROM BANK
- Metallic: RM53,400
- 50% Down Payment: RM26,700
- 50% Car Loan: RM26,700
- Car Loan Tenure: 9 years
- Car Loan Interest: 3.65%
- Monthly Installment: RM328.43
COMPARISON: PAY MAXIMUM VS. BORROW MAXIMUM
SCENARIO 1: PAY MAXIMUM DOWN PAYMENT
Pros: By doing so, we will have an option to have shorter loan tenure by paying higher car loan payment instead of RM328.43. Besides, it helps to save more interests.
Cons: Smaller seed capital
SCENARIO 2: BORROW MAXIMUM CAR LOAN
Pros: Bigger Seed Capital. In another words, we have more cash on hand. The extra money can be used to invest in property, share market, unit trust, gold, or amanah saham for higher ROI. Why should I use my own cash to pay RM26,700 for car down payment since I have the option to pay only RM5,340? The difference is RM21,360.
How important is the lump sum money of RM21,360 for us? Ask yourself, how long is needed for you to accumulate the savings of RM21,360? The time frame needed determines the importance. Agree?
Cons: Pay more interest & longer loan tenure. For your information, earlier full settlement on car loan to save interests can be arranged with banker. Who knows you have made handsome money from your investment after few years?
CONCLUSION
I prefer to pay minimum down payment for car down payment. If options are given, zero down payment loans are even better. Cash is KING!What about if the extra money is invested wisely into property or shares market as young as possible you can?
The Power of Leverage in property investment will shows you how powerful is it to help us in building greater seed capital. Money makes money. It’s a fantastic investment tool! Of course, high risk high return, all the risks must be taken into consideration.
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