Car Interest Rates

[flavus]

.e, you have a 7% loan on 100 million cars for 3 years. They will calculate 7% on 100 million and multiply by 3, getting 21 million of interest total. Then, that amount of interest is put back into a consumer-style monthly payable loan (equal installment, most of the interest coming at the nearest payments)

This actually sounds good. If you get 7% APR, compounding monthly, it will be much more than 21% in total.

We are not talking about a multi billion rupiah loan for a house for two or three decades where the interest is recalculated every month or quarter or year…. and thus depends on the outstanding amount

Interestingly, in the US house mortgages actually work like this. Flat payments every month. You can pay more principal if you want, and if you pay a significant amount you can ask them to recast the loan (recompute your monthly payment)

Unlike the nominal interest rate, which only includes the pure credit costs, handling costs and registration fees also apply when taking out a loan

This, I suspect, is where the difference comes. Let me guess... in Indonesia you can't pay off the loan early without penalty?

Here in the US, people sometimes lease or finance to get a sweetener from the dealer (who gets kickback) then pays it off at the earliest opportunity.

Costs a hit in credit score but eh, sometimes it is worth it.

 

[centurion]

This actually sounds good. If you get 7% APR, compounding monthly, it will be much more than 21% in total.

If you get 7% "nominal" it would be around 13% APR per year, and a slightly more effective interest rate per year. Good if you are a lender. What they call "nominal" for car loans is not the APR.

However, the lowest interest rates in Indonesia for cars start around 9%, meaning a minimum of 15% in real interest rate (apr or effective).

 

[flavus]

you get 7% "nominal" it would be around 13% APR per year

Ah gotcha, nominal is the monthly interest times twelve then. Misleading in that case!

 

[snpark]

Dont confuse the different types of mortgage

capital + interest

interest only

and yes the one where interest is compounded annually

or sharia one where its a profit rate added on to the initial loan amount and divided equally by the term so that every instalment is part loan part profit rate

the best investment to give anyone? pay off all your credit cards immediately

there is no investment that pays you over 20% a year but that is what credit card companies charge and if you owe 100jt and pay 99jt, you still pay interest on that full 100jt

read the small print

thats why credit cards can be great as long as you repay in full each month, use their money for free and keep yours on deposit and earn miles etc

plus you get a great credit score and black / unlimited cards

 

[snpark]

the old "apr" annual percentage rate eg the monthly 1.2% sounds great, but 14.4% not so good

 

[Samoerai]

Dont confuse the different types of mortgage

capital + interest

interest only

and yes the one where interest is compounded annually

or sharia one where its a profit rate added on to the initial loan amount and divided equally by the term so that every instalment is part loan part profit rate

the best investment to give anyone? pay off all your credit cards immediately

there is no investment that pays you over 20% a year but that is what credit card companies charge and if you owe 100jt and pay 99jt, you still pay interest on that full 100jt

read the small print

thats why credit cards can be great as long as you repay in full each month, use their money for free and keep yours on deposit and earn miles etc

plus you get a great credit score and black / unlimited cards

In the Netflix series 'Money Explained' there is an episode about credit cards.

 

[pantaiema]

It seems this is the common way the car loan / leasing is calculated in Indonesia. So it is different to people common understanding of APR (Nominal interest Rate) and AER (Effective interest Rate). Also as mentioned previously, it does not take into account of the reducing balance every time the monthly payment is made.

Cara Hitung Kredit Mobil Sesuai Kebutuhan dan Simulasinya

Cara hitung kredit mobil yang sesuai dengan kebutuhan dimulai dengan menghitung DP, besaran pokok kredit, suku bunga, biaya asuransi…

otoklix.com

In this example:
Car Price Rp700m, Interest of 6% pa DP 20%, 3years (automatically converted to 36 months).
All of the insurance, admin fees and region is deliberately set to Rp0 (0%) so it could be easily compared. But in reality this will still need to be added to the loan.
DP 20% of Rp700m=Rp140m,
So Credit Loan= Rp700m-Rp140m=Rp560m
Interest rate per year is 6%, so 6% x Rp560m = Rp33,6m per year
So for three years multiplied by three =3xRp33,6m= Rp100,8m
Calculated Monthly Re-Payment
(Rp560m + Rp100,8m) / (3x12) = Rp18,35m per month

It is the same result with credit simulation calculator available for public in Indonesia

Simulasi Kredit Mobil / Pinjaman Kendaraan

Simulasikan kredit mobil anda di sini. Anda dapat mencari harga yang pas buat kantong anda dengan simulasi pinjaman mobil ini.

www.simulasikredit.com

 

[flavus]

Interest per year 6%, so 6% x Rp560 juta = Rp33,6m per year

Thanks. So it actually sounds quite good, it's not that a misleadingly low interest rate is quoted.

 

[snpark]

6% per year for finance is high

 

[centurion]

It seems this is the common way the car loan / leasing is calculated in Indonesia. So it is different to people common understanding of APR (Nominal interest Rate) and AER (Effective interest Rate). Also as mentioned previously, it does not take into account of the reducing balance every time the monthly payment is made.

Cara Hitung Kredit Mobil Sesuai Kebutuhan dan Simulasinya

Cara hitung kredit mobil yang sesuai dengan kebutuhan dimulai dengan menghitung DP, besaran pokok kredit, suku bunga, biaya asuransi…

otoklix.com

In this example:
Car Price Rp700m, Interest of 6% pa DP 20%, 3years (automatically converted to 36 months).
All of the insurance, admin fees and region is deliberately set to Rp0 (0%) so it could be easily compared. But in reality this will still need to be added to the loan.
DP 20% of Rp700m=Rp140m,
So Credit Loan= Rp700m-Rp140m=Rp560m
Interest rate per year is 6%, so 6% x Rp560m = Rp33,6m per year
So for three years multiplied by three =3xRp33,6m= Rp100,8m
Calculated Monthly Re-Payment
(Rp560m + Rp100,8m) / (3x12) = Rp18,35m per month

It is the same result with credit simulation calculator available for public in Indonesia

Simulasi Kredit Mobil / Pinjaman Kendaraan

Simulasikan kredit mobil anda di sini. Anda dapat mencari harga yang pas buat kantong anda dengan simulasi pinjaman mobil ini.

www.simulasikredit.com

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View attachment 3138

You did not finish your analysis. The problem is that APR (and Effective Interest Rate that is also around) is not, 6 but around 11%. If you put this in a mortgage calculator these numbers (as the car loan is a consumer loan with this kind of repayment) are -560 million, 36 months, monthly payment of 18.35 million, you get an interest rate of a 11.05% per year.

To compare, if you ask the bank to give you a 560 million loan for a house, for 36 months with a 6% interest rate, you will get a monthly payment of 17 million.

 

[centurion]

6% per year for finance is high

It is 11% actually.

 

[Samoerai]

You did not finish your analysis. The problem is that APR (and Effective Interest Rate that is also around) is not, 6 but around 11%. If you put this in a mortgage calculator these numbers (as the car loan is a consumer loan with this kind of repayment) are -560 million, 36 months, monthly payment of 18.35 million, you get an interest rate of a 11.05% per year.

To compare, if you ask the bank to give you a 560 million loan for a house, for 36 months with a 6% interest rate, you will get a monthly payment of 17 million.

The OP got his answer.

 

[Samoerai]

However, how to negotiate the purchase price of the car? Are perhaps some tips and guidelines to give? How much discount is possible? Is 10% a realistic discount in the situation that one takes the loan from the car dealer? How much in the situation that one does not take a loan from the car dealer? When it concerns an older model, like Jstar mentioned, how much discount is possible? Is it also possible to nego on the interest rate of the car loan? And does the rain season also influences the nego opportunity's (musim hujan)?

 

[snpark]

Pay by finance. You might get a lesser price but more add ons, extended warranty service, free rubber mats etc. Or buy old stock they want to get rid of before new versions arrive. Buy during the low season.
But paying cash for a brand new car they literally will lose a sale than give a big discount. They are stubborn. The margins are low.

Or buy something plasticy from China or the lower brand like daihatsu terios. Not Toyota rush. It's the identical car but half the price

 

[snpark]

6/10 Indonesians do not have access to a bank account.

Only 1/10 Indonesians are eligible for a credit card

 

[snpark]

 

[centurion]

However, how to negotiate the purchase price of the car? Are perhaps some tips and guidelines to give? How much discount is possible? Is 10% a realistic discount in the situation that one takes the loan from the car dealer? How much in the situation that one does not take a loan from the car dealer? When it concerns an older model, like Jstar mentioned, how much discount is possible? Is it also possible to nego on the interest rate of the car loan? And does the rain season also influences the nego opportunity's (musim hujan)?

The way to negotiate, in the case of second-hand, is to go directly to the owner. Then you can get a good price, and pay cash. The best is to look for a second-hand car with 5-10.000km (this also means the car is still in the warranty period)You can also get the loan directly, not through the dealership, and bypass their commissions, but tis is only if the owner is cooperative. If you take a loan, it would be good to have high participation/downpayment (maximum is 40%), and the loan to be less than 3 years.

I bought 3 cars in Indonesia. The first time I was naive it was on a 5-year lease and they ripped me off in total. For the second one, I took a 3-year lease but it was still expensive.

For the third car, I met the owner, he asked XXX Rp, and I asked how about you give me a 15% discount and you get the money today? I got a 10% discount at the end. The car had less than 5.000 km.

 

[centurion]

6/10 Indonesians do not have access to a bank account.

Only 1/10 Indonesians are eligible for a credit card

And according to World Bank metrics, 20% of Indonesians are below the poverty rate (3.2 USD/per day) in 2023.

I noticed that Vietnam is catching up Indonesia, and their GDP/per capita will be higher than Indonesian in year or two, + they have onlu 5% poverty rate.

 

[snpark]

And according to World Bank metrics, 20% of Indonesians are below the poverty rate (3.2 USD/per day) in 2023.

I noticed that Vietnam is catching up Indonesia, and their GDP/per capita will be higher than Indonesian in year or two, + they have onlu 5% poverty rate.

Yes we had this chat elsewhere someone said monthly average salary is 11jt or something when 95% make less than 5jt a month an 5% make $50,000 a month

the logistics of the country dont help being so big and wide and spread over 17,000 islands rather than 1 metropolitan area like London or NY etc

 

[Samoerai]

That being said about wages, income, etc. Why are we talking about this. Is it because 60% of Indonesians can not afford a car? Is it a reason that cars are bought by means of bank loans? Or a reason why cars are bought with cash only? I am lost.