What kind of car can you afford not to get behind with it than without it?
Everybody likes to drive a nice car. A car that is in a far higher category than it is possible at the time, or a poorly chosen loan, is a disadvantage for many years, even if your company doesn’t kneel down because of a car. From here, however, the legitimate question is what a car you can afford now.
I stress that now, because taking advantage of the effect of compound interest for a few years, and you can drive a car that you would like to choose now.
If you ask car dealers, I don’t think too many will report that customers will figure out what that decision means them. If they can’t afford it, they elongate the loan term for it. And that’s the only thing they do.
Many people jump into the buying with some kind of logic:
Do you want a car like this? Don’t complicate it! – Buy it!
Just kidding, if you do that, the only car you can think of will be this:
The most commonly offered periods are between 60 and 72 months. And after that, in many cases, one longs for a new or newer car. The deductible has gone to repayment so far, so it is realized again on credit.
Yet it takes a total of a few years to get out of the spiral. Are those few years comfortable? Not necessarily. But you can decide which one is better for you. From credit to credit, and if there is a loophole, everything is ruined, or a few years with a smaller car.
Here, the scope of this article does not allow us to look at the impact of credit on a company’s cash flow. In your own business, you can see for yourself at the end of the article what is obvious to you. You may have already read about when a loan is good and when it is not.
How do you know that car is financially right for you?
If you can’t buy a car for cash, let’s see what the general rule is that shows you what you can think about so as not to bankrupt you because of your own car.
The 20/4/10 rule is used for this.
20: I mean 20%, this is the minimum deductible (if you don’t have that much, you know you have to look for a cheaper car and not, personal loan, revolving loan, other loan product is not deductible)
4: maximum term (4 years)
10: a maximum of 10% of the total monthly income can go to maintaining the car (from fuel, service, installments, everything)
Let’s look at the 20/4/10 rule in numbers.
John, the car buyer earns 600,000 net per month (either that’s the monthly income of the business or the household’s monthly income on a private side). Returning to the 10% rule, John can spend 60,000 forints on the car per month. And that includes the fuel too.
That you can’t buy a car out of that? According to the calculator, a car of about one million forint can come out of this with a 48-month term, with maintaining and with everything. Is it small? Yes, it is. Is there any other solution? Yes, there is, called public transport.
Let’s look at 2 alternatives and see which means what.
Both are based on information on the net, two calculation of one of the comparison portals with the offer of the same bank, now listed as an individual.
A car loan is nothing more than a special type of unsecured personal loan. Here you can only spend this on a car, basically all other conditions are the same as your personal loans. As the bank only wants to see at both the individual and the company if the borrower can repay the loan based on the income, so the 0% deductible can also be collected from other loans. (But as I wrote, it’s not really equity)
The 2 alternatives and the difference between them
Here, John buys a car for 7.5 million, which is far from the top of the selection, but the difference is already here.
|Case 1||Case 2|
|Purchase price||7.500.000 forint||7.500.000 forint|
|Deductible||0% = 0 forint||20% = 1.500.000 forint|
|Loan amount||7.500.000 forint||6.000.000 forint|
|Monthly installment||129.640 forint||145.045 forint|
|All repayable interest||1.834.080 forint||962.160 forint|
The term is 2 years shorter in the second case, so John pays the bank HUF 871,920 less. In fact, in both cases, he bought himself a car and a smaller one for the bank, the only question is how much smaller.
The result of the car loan:
In the second case, John can only buy a not-too-large vehicle on his own, which if he drives for 4 years and puts aside the repayments that he would have to pay in a 4-year construction anyway, he will achieve the following results without any return:
|Number of years||Amount saved (in forint)|
It can be seen that John can buy a car of nearly 7 million forints for cash in the 4th year from the unpaid sums. It’s a pretty good reward for driving a tiny car for a few years.
So for a total of 4 years, and if you have the right discipline, you can easily switch to a bigger car. It may not even be a luxury category, but at least you took it from cash yourself. (Ask us for help with the “acceleration bar”.)
To help you find the way to your dream car the easiest way, calculate how much that car loan will cost you. To do this, download the Silver Moon calculator.
With the calculator, you can easily calculate how much the interest to be repaid (i.e. the fee for using the bank’s money) will change if you change the deductible or choose another type of interest rate.
1. How do you choose a transport device?
2. What does its funding look like?
3. Do you think it is important, and if so, why not to exceed the 10% limit to maintain your car?
Ask us your questions in the comments or contact us in person.
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