Nowadays, most items can be credited, including cars, both the used and new. Car loan promotions are very common, with tempting offers to claim the lowest car loan interest. Even so, the terms of a down payment should follow Bank Indonesia regulations governing the amount of the Loan To Value (LTV) also known as Down Payment (DP) Vehicle Loans (KKB).
For some people, buying a car through a loan is considered as a solution to meet the need for mobility. Understandably, not everyone is in a financial position to buy a car in cash, so credit allows anyone to have a car even though they may not have the full amount needed to buy outright. Also there are some logical reasons why buying a car on credit has advantages rather than cash. Consider the following:
● Buying in cash drains savings
The account might hold sufficient savings to buy cash. But remember, the price of the new car is in the range of over USD 100 million. If all that money in savings is withdrawn, the balance will be depleted. In fact, financial planning experts always recommend to have a reserve fund for emergency purposes.
This is where the role of the car loan is financially wise. Through credit, someone will be helped in the financial arrangements to meet the needs that are urgent and at the same time be able to have the new car.
● Loan rate
Inherent in the purchase on credit is the interest rate burden. Interest paid is really for the use of ‘services’ from the customer to the financial institution that has been kind enough to lend money. Inevitably, when choosing the credit option you should focus on the level of this interest. Note also the type of interest can be fixed (flat) or floating (floating – can go up or down).
Each of these types of interest has pluses and minuses. What needs to be looked at closely is the ability to pay monthly instalments. Fixed rates are easier to budget for in your monthly outgoings so that you know you will pay the same amount each time.
● Note the maintenance costs and taxes
Tax and service charges are automatic and so should be considered as an expense that must be met. Each year to pay vehicle tax is the duty of every car owner. Similarly, the cost of the service for your car maintenance. These are two types of expenditure that must be anticipated when choosing the credit option.