simple hire-purchase loan calculation for prospective new car owner

hi everyone.... wishing all Malaysian have a great long holiday. As usual, being typically me long holiday mean travel 350km south bound visiting my beloved parents is must do agenda... but not this time as I'm on day 2 of 30 days CAR less challenge, furthermore mid-term exam is around the corner, to be exact will seat for my mid-term next week.

to those who planning getting your new car, please be aware that interest rate been provided to us by the car dealer sometimes bit misleading as such it's important for us to know how much the actual interest rate that we actually have to pay.

simple calculation as follows, its based on current price of MAZDA 3 in Malaysia.

DETAILS

Car brand/ Type : Mazda3 CKD sport 2.0 HB

Retail Price with Insurance : RM139,760.20

Down payment (10%) : RM 14,044.00

Total loan required : RM125,716.20

Tenure : 7 years

Interest Rate : 2.6%

PV= RM125,716.20 n=7 i=2.6%

1. What total interest will becharged on this loan for entire 7 years duration?

Ø RM125,716.20 x 0.026 x 7

= RM22,880.35

2. What is the monthly instalment?

Ø (RM125,716.20 + RM22,880.35) / (7 x 12)

Ø RM148,596.55 / 84

= RM1,769.00

3. What annual percentage rate(APR) is actually being charged here?

PMT = RM1,769.00 n = 84 PV= RM125,716.20 FV = 0

I = solve = 0.40556

Annual Rate = 0.40556 x 12

= 4.8667%

4. What is the effective annualrate (EAR)?

EAR = (1 + 0.048667 / 12) ¹² - 1

= 0.049767 x 100

= 4.98%

5. After paying the 50^th.Instalment, what will be the loan balance ?

PMT = RM1,769.00 i = 4.8667/12 = 0.40556 n = 84 – 50 = 34 FV = 0

PV = solve = RM56,077.45

Based on above calculation when the car dealer told us that the interest rate is 2.6%, the effective annual rate that we have actually been charged were 4.98%, so its advisable to have more down payment, to lower down amount of loan required.

Happy shopping on your NEW CAR............. much luv, makandak