Accurate Calculation of Car Loans and Examples

Are you considering buying a car and want to know how to accurately calculate car loans? If so, you're in the right place! In this article, we will comprehensively discuss how to calculate car loans along with examples or simulations.

 

Buying a car on credit is one of the popular options in Indonesia. This way, you can own your dream car without having to pay a large amount of cash upfront. However, before applying for a car loan, it is important to know how to calculate car loans so that you are not burdened with excessively high installments and can manage your finances effectively.

 

Generally, people commonly think of calculating car loans in a simple way, by dividing the remaining price of the car by the loan tenure. For example, if the car price is IDR 200 million and the down payment is IDR 20 million, then the remaining price of the car is IDR 180 million. If the loan tenure is 2 years or 24 months, then the monthly installment would be IDR 180 million : 24 months = IDR 7.5 million/month. However, this method is not accurate.

 

It is important to note that there are several factors that also need to be calculated, such as administrative fees, insurance, and loan interest. Therefore, this article will provide information on the correct way to calculate car loans.

 

How to Calculate Car Loans and Examples:

1. Determine the Down Payment Amount

Banks and financial institutions offering car loan financing have rules regarding the down payment (DP) amount. Generally, the DP ranges from 15-30%.

 

For example, if the price of car X is IDR 200 million, and the minimum DP set is 30%, then the required DP is as follows:

Down Payment = 30% x IDR 200,000,000 = IDR 60,000,000

2. Calculate the Principal Loan Amount

After determining the DP amount, the next step is to calculate the principal loan amount that needs to be paid. This is done by subtracting the total car price (On The Road - OTR) from the DP amount previously determined.

 

Example calculation:

Principal loan amount = Car price - DP

= IDR 200,000,000 - IDR 60,000,000 = IDR 140,000,000

3. Calculate the Interest Rate

After knowing the principal loan amount, the next step is to determine the interest rate. You can multiply the principal loan amount by the agreed-upon interest rate with the bank or financial institution, along with the specified loan tenure.

 

Example calculation:

Let's say car X is financed with a used car financing product with an 8% interest rate and a loan tenure of 3 years (36 months). Thus, the interest rate is:

Interest rate = 8%

Loan tenure = 3 years

 

Interest rate = Principal loan amount x interest rate x loan tenure

= IDR 140,000,000 x 8% x 3 years

= IDR 33,600,000

4. Calculate the Monthly Installment

After knowing the DP amount, principal loan amount, and interest rate, the next step is to calculate the monthly installment that needs to be paid. This is done by adding the principal loan amount and the interest, then dividing it by the loan tenure or term.

 

Example calculation:

Monthly installment = (Principal loan amount + interest) : loan tenure in months

= (IDR 140,000,000 + IDR 33,600,000) : 36 = IDR 4,822,222

 

5. Include Administrative and Insurance Costs

In addition to the monthly installments, you also need to factor in administrative and insurance costs in the calculation of car loans. The amount of these fees can vary depending on the policies of the bank or financial institution you choose.

 

For example:

The purchase of car X with a used car loan incurs an administrative fee of IDR 2,500,000 and insurance at a rate of 9.5%. For insurance with a 3-year tenure, the calculation is as follows:

Insurance rate = 9.5% x total car price

= 9.5% x IDR 200,000,000

= IDR 19,000,000

 

The total initial cost of the car loan for car X is:

DP + insurance rate + first-month installment + administrative fee

= IDR 60,000,000 + IDR 19,000,000 + IDR 4,822,222 + IDR 2,500,000 = IDR 86,322,222

 

Based on the above calculation, it can be concluded that the purchase of a used car brand X worth IDR 200,000,000 can be done on credit with a first-month installment of IDR 86,322,222 and subsequent installments of IDR 4,822,222 for 36 months.

 

Read Also: Hyundai Stargazer Car Rental Prices: Daily, Monthly and Yearly

Documents to Prepare for a Car Loan

 

After understanding how to calculate car loans, here are some documents that are generally needed to apply for a loan.

 

• Photocopy of your Identity Card (KTP).
• Photocopy of your Family Card (KK).
• Photocopy of your Tax Identification Number (NPWP).
• Latest salary slip.
• Proof of payment of property tax (PBB), electricity, and water bills.
• Photocopy of the last 3 months' bank transactions.
• Photocopy of the business permit (if you are self-employed).
• Vehicle registration certificate (BPKB) for used cars.

 

Make sure to check the requirements set by the financial institution you choose, as the needed documents may vary. By preparing them, you will expedite the car loan application process.

 

Read Also: This is the reason why Avanza and Xenia are the Most Popular Cars to Rent

 

Understanding how to calculate car loans is a crucial step to make informed financial decisions. By comprehending it, you can calculate your monthly expenses to pay off the loan, ensuring that your budget is well-managed.

 

If you are still hesitant to decide on a car loan, it's worth considering car rental services. Car rental can be a more flexible and cost-effective option, especially if you only need a car for a specific period.

MPMRent, a reliable car rental company in Jakarta, provides various types of cars from different brands. Here, you can rent a car for both short and long terms. Additionally, MPMRent takes responsibility for maintaining all its fleet units, so you don't have to worry about their performance. Contact us now for further explanations.