## Car Loans Can Be Expensive Or Cheap

Cars or other motorized vehicles are not primary needs. But with increasing mobility, especially in big cities, vehicles sometimes become something that is very much needed.

Many people do not have large amounts of cash, so buying a car in cash is not an option. You can outsmart it with car loans.

Car loans are included in Motor Vehicle Loans (KKB), which is one alternative financing for obtaining a new or used car or motorcycle with an installment system.

Credit can be submitted to banks or other financial institutions that provide these loan products.

Generally, the guarantee used in the KKB is the vehicle itself, so if you fail to pay, the vehicle will be confiscated.

Unfortunately, car loans aren’t necessarily cheap. There are still many who feel burdened because of the amount of installments per month.

Thus, you need to be very clever looking for cheap car loans before submitting them. What are you curious about how to get cheap car loans?

Through the following article, Lear will describe some easy ways for you.

## Component of Car Credit Costs

Car loans or KKB have several main components of costs, such as advances, interest, and others.

Before entering the way to get cheap car loans, you should first listen to the following points:

### # 1 KKB Down Payment / DP

Down payment is money paid in advance as a sign of being. Generally, the minimum amount of down payment has been determined by the bank or leasing .

In an External Circular Number: 14/10 / DPNP dated March 15, 2012 concerning the Application of Risk Management to Banks that Conduct Motor Vehicle Loans (KKB), Bank Indonesia determines that the minimum down payment for motorized vehicles is 30%.

Example calculation:

Car price: IDR 300 million

DP (%): 30%

So, the amount of DP that must be paid = 30% x IDR 300 million = IDR 90 million

### # 2 Principal or Credit Ceiling

The credit principal is the remaining credit to be paid, ie the price of the selected car is reduced by the down payment.

Example calculation with the same case:

Credit principal = Price of car – DP

Credit principal = IDR 300,000,000 – IDR 90,000,000 = IDR 210,000,000

### # 3 KBB Interest Rate

Interest rate is the amount of interest charged to debtors. Generally, the percentage of this interest is a percentage for a period of 1 year or often called the Annual Percentage Rate (APR).

The amount of interest depends on the tenor of the loan, where the longer the time period, the interest is also higher.

There are differences in interest rates for KKB in each bank and leasing , but as of 2017 the amount ranges from 6-8% per year.

To calculate it, the agreed interest rate is multiplied by the loan principal and then adjusted to the tenor of the credit.

Example calculation with the same case:

Interest rate: 8%

Tenor: 3 years

Interest = Credit principal x Interest rate x Tenor

Interest = IDR 210,000,000 x 8% x 3 years = IDR 50,400,000

### # 4 KKB Installment Amount

Installments or auto loan installments (KKB) generally consist of two components, namely principal and interest.

For the calculation, the principal is added to the interest to be paid and divided according to the tenor of the credit.

Example calculation with the same case:

Monthly installments = (Credit principal + Interest): Tenor (in months)

Monthly installments = (Rp210,000,000 + Rp50,400,000): 36 months = Rp7,233,333

## Car Installments of 1 Million? How to?

Now, after knowing some components of the costs, then you now need to find ways to reduce these costs as low as possible. This can have a significant effect , considering car loans are something that has a long period of time.

Now, how do you get cheap car loans with installments as low as Rp1 million per month?

### # 1 Choose the Longest Loan Term

Now, the period of car loans is increasingly varied, even reaching 8 years. Then why should you choose a long loan period?

Logically, the longer you pay off your car loan, the more interest you will pay. However, you can also enjoy the benefits of smaller installments.

To prove it, try to look at the following calculation simulation:

Assume you live in Jakarta with a standard salary, which is IDR 3 million to IDR 5 million. In credit, the term debt ratio is known, where the ratio of debt to income generally should not exceed 30%.

Thus, your credit limit is IDR 900 thousand to IDR 1.5 million. Is it possible to look for car loans in installments as low as Rp900,000?

For installments as low as Rp900 thousand to Rp1 million, you can search for cars with a price range of Rp80 million – Rp130 million.

Several alternative cars with this price range are quite a lot, including Honda Brio Satya, Toyota Agya, Datsun Go + and Go H atchback, Daihatsu Ayla, Suzuki Karimun Wagon R GA , and many more.

Assume:

- The price of a car is Rp110 million
- Down payment (DP) of 20% = Rp. 22 million
- So, the number of car loans taken = Rp110 million – Rp.22 million = Rp.88 million
- Interest is assumed to be 6% per week

But the weakness in this method is that the long tenor means a long-term commitment, not to mention that the car is usually of a fairly short age. So consider carefully, do not let you sell a car when the credit is still long.

### # 2 Using the Payment Credit System

The second step is to use a balloon payment system . What is a balloon payment ?

Credit balloon p ayment is a credit payment program wherein the installment payment is lighter at the beginning and will be higher until the repayment of the credit is done at the end of the program.

Unlike the standard car loan with the same amount of installments per month until the end of the loan tenor, credit balloon payment allows very low installments in the first few years because the installment expenses are accumulated in the back.

To understand how it works, let’s look at the following simulation:

Assume:

- You want to buy a car at a price of Rp110 million
- Down payment (DP) of 20% = Rp. 22 million
- So, the number of car loans taken = Rp110 million – Rp.22 million = Rp.88 million
- Interest is assumed at 6% per year.

With a balloon payment , you can repay 30% of the price of the car for the first 3 years. Then at the end of the third year you pay off 50% of the price of the car.

The following is the monthly installment calculation for the first 3 years:

- Loan interest = (6% x Rp. 88,000,000): 36 months = Rp. 146,666
- Installments per month = (30% x Rp110,000,000): 36 + Rp146,666 = Rp1,063,333
- Repayment at the end of the tenor = 50% x Rp110,000,000 = Rp55,000,000

The comparison with standard car loans is in the installment formula, where:

- Regular installments formula = DP + monthly installments
- Balloon payment installment formula = DP formula + monthly installments + repayments

Now let’s see the difference in the number of standard car loan installments and balloon payments as follows:

The monthly installments are very different, right? You can pay in installments very lightly, even almost one-third of the ordinary installments, which is only Rp1,063,333.

### # 3 Enlarging Advances (DP)

As previously stated, down payment (DP) is one of the main cost components in car loans.

The amount of DP can certainly affect the amount of installments per month that you have to pay.

Logically, the bigger the DP, the lighter installments you need to pay because the loan size is also smaller.

To see a comparison of the amount of installments with different advances, let’s look at the following significant comparison:

You can see the difference in the amount of installments with the same tenor, which is 3 years. Where:

- The installment with DP 20% is IDR 2,884,444
- The installment with a 75% DP is IDR 901,388

Thus, you can buy a car even though your salary is only IDR 3 million. But unfortunately this method also has a weakness, that is, you need to provide very large funds at the beginning, with a down payment of IDR 82,500,000.

## Car Loans

In addition to applying the tips outlined earlier, of course car loans will be much cheaper and you can get a dream car for your family without being constrained by more costs.

We believe that you can get ideal car loans at prices that match your income, even if you only have an income as large as the UMR Jakarta.

What is important, do a careful calculation and do not forget to look for a bank or leasing that also helps car loans with attractive offers, such as low interest rates or long tenors.