HaatBeatHow it's calculated
Loan = price × (1 − down payment share)
EMI = L × r × (1 + r)^n ÷ ((1 + r)^n − 1)
L is the loan, r the yearly rate ÷ 12 and n the number of months. Total cost is the price plus all the interest.
Assumptions
- A fixed rate and equal payments at the end of each month.
- Processing fees, insurance and dealer charges are not included.
Worked example
A 10 lakh rupee car with 20% down, at 9% for 5 years, costs about 16,607 rupees a month and 1,96,401 rupees in interest. A 30,000 dollar car with 20% down at 7% for 5 years costs about 475 dollars a month.
Questions
Is a bigger down payment better?
It lowers the loan, the EMI and the interest. Keep enough savings for emergencies, though.
Should I take the longest tenure?
A longer tenure lowers the EMI but adds interest, and the car loses value while you pay. The shorter or longer loan page compares tenures.
Should I pay cash instead?
It depends on the loan rate and what the cash could earn. The car cash or loan page compares both.
Sources
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