Don’t Car Loans Again, If You Don’t Know the Rules

Is it wise and true car loan? There are a number of financial experts in Indonesia who suggest not car loans, is it their opinion?

Don’t Car Loans Again, If You Don’t Know the Rules

Don

As a financial planner, Claudine has been asked several times about car loans. Actually, can car loans or not? The answer is “depending on the situation and condition”. In some conditions, car loans can cause a person’s finances to become more messy.

Usually the cause of the problem is that people do not calculate operational costs after buying a car and the amount of installments that must be paid. Regarding installments to be paid, here is an example of a simple car loan simulation:

Car pricesIDR 200,000,000
Credit period3 years (36 months)
Interest rate / year8% per year
Down paymentIDR 40,000,000
Installments / monthIDR 5,511,200
Total installments (36 months)IDR 198,403,200
Total car purchases on credit (DP + Installments)Rp. 238,403,200

Try to imagine the total cost that you spent for 3 years was Rp. 238,403,200. Even though at the end of the third year the price of your car is under Rp. 200,000,000 (due to depreciation or decline in the value of the car). The problem is worse, if you have not prepared additional expenses that arise because of the car: gasoline costs, tolls, parking, extension of licenses, vehicle tax and so forth.

Car Loans to Buy Cars as Assets

Car Loans to Buy Cars as Assets

Another story is if you are a car loan that functions as an asset. This means that the car is used to work and generate income for you.

We have encountered cases like this accidentally when we use online transportation services in Jakarta. The driver of the car turned out to be a car owner and he was a taxi driver. Currently, he has left a taxi company and has 3 cars himself. Even though the car is still in credit, the car can generate income.

Let’s try doing a simple simulation:

Car pricesIDR 200,000,000
Credit period3 years (36 months)
Interest rate / year8% per year
Down paymentIDR 40,000,000
Installments / monthIDR 5,511,200
Total installments (36 months)IDR 198,403,200
Total car purchases on credit (DP + Installments)Rp. 238,403,200
Monthly rental income (net)IDR 6,000,000
Difference in income from monthly rent and payment of installmentsIDR 488,800

Try to pay attention to the data above, every month there is a profit of Rp. 488,800. Vehicle owners no longer need to spend on paying for car loan installments. If calculated, then an advance of Rp. 40,000,000 can be returned after almost 7 years. Usually vehicle owners will sell cars in the year 5 to make a profit.

Do you think car loans still benefit customers?

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