Make your finance period work for you

It’s possible to pay off your car over anything from 12 to 72 months. Choose a finance period that will suit your needs and budget, both now and during the next few years.

The sooner you pay off your car loan, the higher your monthly instalments but the less you actually pay in the end.

For example, if you pay off a car over 4 years:

Car price R150,000
Interest rate 11%
Monthly instalments R3,976.17
Total cost R190,855.94 (incl. initiation fee & monthly admin fees)

That’s R36,375.74 in interest plus R4,480.20 in fees.

 

With a longer finance period you pay less each month but you end up paying more interest on the loan.

For example, if you pay off the same car over 6 years:

Car price R150,000
Interest rate 11%
Monthly instalments R2,946.30
Total cost R212,133.29 (incl. initiation fee & monthly admin fees)

That’s R56,011.49 in interest plus R6,121.80 in fees.

 

It all depends on what you can afford each month – the more you can pay, the sooner your contract is over and the less you pay overall.

If you can’t manage a higher payment each month, then it would be wiser to look at a cheaper car or save up for a deposit (which can also reduce your instalments) than taking a longer finance period.

 
 

2 thoughts on “Make your finance period work for you

  1. Yes,especially on loan repayment. Actually i was aware of the interest rate when paying a loan for a longer-term than on a shorter term.
    I learned something indeed.
    So if I want to buy a new used car without a deposit,how do I work out the instalment and duration thereof?

  2. You take a car loan for 72 months, after a year your financial situation changes you can afford to pay more, do you go to bank and sign a new contract for shorter period? Or let’s say after 24 months of paying you can’t afford the premiums can you go to bank and refinance the car for longer period and lesser premiums?

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