Whats goin on in Auto Loans ??

tsk1979 · 2nd January 2006, 14:49

This is related to the ICICI thread, but after being on phone with number of agents of different banks I found out that they lie through the teeth.
They will tell you that they will offer load at 6.5% interest. I asked him about EMI and tenure,
After that I went to http://www.sundaramfinance.com/calc/emicar.asp
I entered the EMI 12322, for 36 months.the interest rate came to 6.84%, with 6.5% the emi should be 12259. Now 63rs/mo for 36 months means cheating of rs 2268. Such a small amount over three years. But cheating is cheating. Somebody I know got a loan at 9.5% with finace discount of 4.5%, but when I put his emi in the calculator it was 9.9%. Now 50-100rs/month is something he wont notice, and many people dont even bother which leads to such modus operandi by agents of banks. On longer term loans like 7 years this cheating in even more.

deepakhon · 2nd January 2006, 14:52

Good post this one. Most of us do not want to do any calculations nor do we know how the heck they calculate. Good to know that there is a calculator available which gives us the exact EMI for that rate of interest.

Zappo · 2nd January 2006, 14:55

Quote:

Originally Posted by tsk1979

This is related to the ICICI thread, but after being on phone with number of agents of different banks I found out that they lie through the teeth.
They will tell you that they will offer load at 6.5% interest. I asked him about EMI and tenure,
After that I went to http://www.sundaramfinance.com/calc/emicar.asp
I entered the EMI 12322, for 36 months.the interest rate came to 6.84%, with 6.5% the emi should be 12259. Now 63rs/mo for 36 months means cheating of rs 2268. Such a small amount over three years. But cheating is cheating. Somebody I know got a loan at 9.5% with finace discount of 4.5%, but when I put his emi in the calculator it was 9.9%. Now 50-100rs/month is something he wont notice, and many people dont even bother which leads to such modus operandi by agents of banks. On longer term loans like 7 years this cheating in even more.

Hey... thats a trick I was aware of when I took my car loan. It works like this. When you try the EMI calculators these actually start counting the EMIs, begining with the first after a month of the disbursal. However in real life what these guys do is that they ask you to pay 1 EMI as down payment to these banks the moment you take the loan (at the time of disbursal). So in effect your ROI goes up than what is actually stated by the agents. You have not even taken the loan and you have paid an EMI (part principle+interest component). Unethical actually, but this is what they do.

Zappo · 2nd January 2006, 14:58

Quote:

Originally Posted by deepakhon

Good post this one. Most of us do not want to do any calculations nor do we know how the heck they calculate. Good to know that there is a calculator available which gives us the exact EMI for that rate of interest.

Hmmm.... that reminds me. If any of you guys are going for any sort of loan and need to check the calculations do let me know. I have a calculator that can churn out all sorts of reports on all sorts of loans, EMIs etc... Its an in-house tool one of our associates developed for these kind of problems. Its mighty effective!

I used it while taking the car loan. That is how I got wise to their trick of EMI calculation and the advance EMI kaa jhol that actually jacks up the rate they offer you.

shuvc · 2nd January 2006, 15:08

Am not saying that agents don't do this ..
But sometimes, the EMI that is quoted also includes the service tax which is over and above the rate of interest that is being charged. Hence the EMI's may seem a bit more.

SLK · 2nd January 2006, 15:12

I am not very sure ... but I think you are missing something.
There is this standard practice for 1 advance installment... i.e. only principal no interest.... so effectively u got 35 installments and prinicpal is 1 emi less than the original....

So the actuals come out to be...
Principal ----- Interest Rate ------- EMI
4,00,000 -------- 6.5 % ------- 12,193.55
4,00,000 -------- 7.25% ------- 12,322.17

So from what I understand you are being charged 7.25%

Again I have taken loans from ICICI and always recalculated the EMIs... they are almost perfect except for the round off adjustments.

observer · 2nd January 2006, 15:22

I have booked a Baleno. The finance is thru ICICI. My loan amount is 4lacs. The EMI they have worked is Rs 12,804/-
I have opted for upfront finance discount @ 3% of loan amount. So is the EMI/Interest fairly charged? I have yet not signed the loan agreement. Is there scope for negotiation?

Thanks

SLK · 2nd January 2006, 15:47

observer, you didn't mention the interest rate and also the duration of the loan.

narayanang76 · 2nd January 2006, 16:34

Dear friends,

Please, please always be aware on EMIs, their calculations and other factors. A couple of Rs - 10-200 Rs on an EMI will give you huge loss or gain on the complete tenure on the loan.

There are standard amounts decided - based on:

Total Loan amount/Interest Rate/Loan Tenure. Based on this EMI amount per lakh is decided. Multiply that for your loan amount in Lakh. Verify that your EMI amount is at least the same as that, not more than that.

In addition, one of my friend had bad experience from ICICI. He is working in Wipro, Bangalore and happen to apply for a Home Loan for 15 Lakhs, the interest rate was 7.25 % fixed for 20years(ICICI gave that in writing, FIXED for 20 Years, but now I do NOT believe that) nad for 15 years. They had given him the EMI amounts etc, but when the loan got sanctioned it was different. It was more than previously mentioned amount, when he checked with many people ICICI bank, no one was able to reply for his query, but on careful examination on the sanction letter, the Loan amount itself was more. 15 Lakh was 15 Lakh and 30, 000. This 30,000 was for some insurance - which premium amounts they added to his loan amount and the poor guy was made to pay interest for that for 15 years for the same. I had asked him to talk to the guys and re-sanction the loan for 15L.

But this was on a tight schedule, the property builders were behind him to do registration, etc so he had no time. But finally he directly went to ICIC bank, sat there, talked to the Manager and made them make the new loan sanction letter for the correct amount.

So please please aware that these things happen - so take very good care when you deal financials with these unethical instituitions. They do not have any Credit Worthy histories, they just want to make quick bucks - unethically.

I feel Accountability, openness and customer centric and a few words which lacks meanings on these financial instituitions. Not only ICICI, but all these multinational so called Banks. I feel we should only go with our nationalised banks like SBI etc, but yes we understand they take long time to process and not at all customer friendly.

But anyways - we are paying for the mess :(

Regards,
Narayan

observer · 2nd January 2006, 16:45

SLK, sorry, the tenure is 3 years and the rate of interest is 10% (that's what the dearler is telling me). 3% is finance discount, so should I say the rate is 9%. Should I get a better deal?

Thanks

SLK · 2nd January 2006, 17:04

Observer - the EMI calculation in your case seems to be perfect... a difference of Rs 136 (in Total)... is immaterial.

Your Effective interest rate when calculated on diminishing balance is 8.25% p.a.
Your Effective Simple interest rate is about 4.15% p.a.

The deal seems fine to me. But since I haven't been involved in buying cars recently... So someone who has recently taken an auto loan could comment better.

Zappo · 2nd January 2006, 18:05

Quote:

Originally Posted by observer

SLK, sorry, the tenure is 3 years and the rate of interest is 10% (that's what the dearler is telling me). 3% is finance discount, so should I say the rate is 9%. Should I get a better deal?

Thanks

Observer, my personal feeling is the rate is a tad higher than what it should be. Marutis are available at much more competitive interest rates. But then again the rate varies from model to model. One thing I can tell you though is that you should go shopping for the loan. Do not accept what one financier tells you. Once you start doing some shopping on the loan it is then that the rate starts tumbling down magically. In fact you will find that even when you involve two three different DSAs for the same financier and let him know that you are getting a better deal through some other guy (for the same finance co.) the rates come down.

deepakhon · 2nd January 2006, 18:15

Quote:

Originally Posted by Zappo

Observer, my personal feeling is the rate is a tad higher than what it should be. Marutis are available at much more competitive interest rates. But then again the rate varies from model to model. One thing I can tell you though is that you should go shopping for the loan. Do not accept what one financier tells you. Once you start doing some shopping on the loan it is then that the rate starts tumbling down magically. In fact you will find that even when you involve two three different DSAs for the same financier and let him know that you are getting a better deal through some other guy (for the same finance co.) the rates come down.

I agree. I had done that when I booked my car exactly two years back. I managed to reduce the EMI by around Rs. 200 per lakh for 5 years.

rapideffect · 2nd January 2006, 18:47

Also, check up with your bank about pre closure charges and terms for the same.I believe, ICICI is the highest in that lot and troublesome aslo. They charge 5% of the value as pre closure charges if you're willing to settle the entire loan at a future date. Also an intimation of settlement a month in advance also needed.

Try to bargain on this.

lamborghini · 2nd January 2006, 19:57

Hey guys,
what is the rate of interest on a used car for 5 years? And on a new car?
We are talking about an Elantra.
Tenure : 5 years
Loan Amount : 9.50 for new and 6.5 - 7L for second hand.
I know this is offtopic but sorry. Also what should one pay for a 2005 Elantra?

2nd January 2006, 14:49	#1
tsk1979 Team-BHP Support Join Date: Feb 2005 Location: San Jose, CA Posts: 23,717 Thanked: 22,825 Times View My Garage	warning to all those taking auto loans This is related to the ICICI thread, but after being on phone with number of agents of different banks I found out that they lie through the teeth. They will tell you that they will offer load at 6.5% interest. I asked him about EMI and tenure, After that I went to http://www.sundaramfinance.com/calc/emicar.asp I entered the EMI 12322, for 36 months.the interest rate came to 6.84%, with 6.5% the emi should be 12259. Now 63rs/mo for 36 months means cheating of rs 2268. Such a small amount over three years. But cheating is cheating. Somebody I know got a loan at 9.5% with finace discount of 4.5%, but when I put his emi in the calculator it was 9.9%. Now 50-100rs/month is something he wont notice, and many people dont even bother which leads to such modus operandi by agents of banks. On longer term loans like 7 years this cheating in even more.
	() Thanks

2nd January 2006, 14:52	#2
deepakhon Senior - BHPian Join Date: Oct 2004 Location: Bangalore Posts: 1,441 Thanked: 65 Times	Good post this one. Most of us do not want to do any calculations nor do we know how the heck they calculate. Good to know that there is a calculator available which gives us the exact EMI for that rate of interest.
	() Thanks

2nd January 2006, 15:08	#5
shuvc Senior - BHPian Join Date: May 2005 Location: Kolkata Posts: 2,913 Thanked: 352 Times View My Garage	Am not saying that agents don't do this .. But sometimes, the EMI that is quoted also includes the service tax which is over and above the rate of interest that is being charged. Hence the EMI's may seem a bit more.
	() Thanks

2nd January 2006, 15:12	#6
SLK Senior - BHPian Join Date: Feb 2004 Location: DL XX XX XXXX Posts: 1,634 Thanked: 1,011 Times	I am not very sure ... but I think you are missing something. There is this standard practice for 1 advance installment... i.e. only principal no interest.... so effectively u got 35 installments and prinicpal is 1 emi less than the original.... So the actuals come out to be... Principal ----- Interest Rate ------- EMI 4,00,000 -------- 6.5 % ------- 12,193.55 4,00,000 -------- 7.25% ------- 12,322.17 So from what I understand you are being charged 7.25% Again I have taken loans from ICICI and always recalculated the EMIs... they are almost perfect except for the round off adjustments.
	() Thanks

2nd January 2006, 15:22	#7
observer BHPian Join Date: Jul 2005 Location: Mumbai Posts: 92 Thanked: 0 Times	I have booked a Baleno. The finance is thru ICICI. My loan amount is 4lacs. The EMI they have worked is Rs 12,804/- I have opted for upfront finance discount @ 3% of loan amount. So is the EMI/Interest fairly charged? I have yet not signed the loan agreement. Is there scope for negotiation? Thanks
	() Thanks

2nd January 2006, 15:47	#8
SLK Senior - BHPian Join Date: Feb 2004 Location: DL XX XX XXXX Posts: 1,634 Thanked: 1,011 Times	observer, you didn't mention the interest rate and also the duration of the loan.
	() Thanks

2nd January 2006, 16:34	#9
narayanang76 BHPian Join Date: Jan 2006 Location: KA 53/KL 9 Posts: 451 Thanked: 836 Times View My Garage	Please always be careful on loans Dear friends, Please, please always be aware on EMIs, their calculations and other factors. A couple of Rs - 10-200 Rs on an EMI will give you huge loss or gain on the complete tenure on the loan. There are standard amounts decided - based on: Total Loan amount/Interest Rate/Loan Tenure. Based on this EMI amount per lakh is decided. Multiply that for your loan amount in Lakh. Verify that your EMI amount is at least the same as that, not more than that. In addition, one of my friend had bad experience from ICICI. He is working in Wipro, Bangalore and happen to apply for a Home Loan for 15 Lakhs, the interest rate was 7.25 % fixed for 20years(ICICI gave that in writing, FIXED for 20 Years, but now I do NOT believe that) nad for 15 years. They had given him the EMI amounts etc, but when the loan got sanctioned it was different. It was more than previously mentioned amount, when he checked with many people ICICI bank, no one was able to reply for his query, but on careful examination on the sanction letter, the Loan amount itself was more. 15 Lakh was 15 Lakh and 30, 000. This 30,000 was for some insurance - which premium amounts they added to his loan amount and the poor guy was made to pay interest for that for 15 years for the same. I had asked him to talk to the guys and re-sanction the loan for 15L. But this was on a tight schedule, the property builders were behind him to do registration, etc so he had no time. But finally he directly went to ICIC bank, sat there, talked to the Manager and made them make the new loan sanction letter for the correct amount. So please please aware that these things happen - so take very good care when you deal financials with these unethical instituitions. They do not have any Credit Worthy histories, they just want to make quick bucks - unethically. I feel Accountability, openness and customer centric and a few words which lacks meanings on these financial instituitions. Not only ICICI, but all these multinational so called Banks. I feel we should only go with our nationalised banks like SBI etc, but yes we understand they take long time to process and not at all customer friendly. But anyways - we are paying for the mess :( Regards, Narayan
	() Thanks

2nd January 2006, 16:45	#10
observer BHPian Join Date: Jul 2005 Location: Mumbai Posts: 92 Thanked: 0 Times	SLK, sorry, the tenure is 3 years and the rate of interest is 10% (that's what the dearler is telling me). 3% is finance discount, so should I say the rate is 9%. Should I get a better deal? Thanks
	() Thanks

2nd January 2006, 17:04	#11
SLK Senior - BHPian Join Date: Feb 2004 Location: DL XX XX XXXX Posts: 1,634 Thanked: 1,011 Times	Observer - the EMI calculation in your case seems to be perfect... a difference of Rs 136 (in Total)... is immaterial. Your Effective interest rate when calculated on diminishing balance is 8.25% p.a. Your Effective Simple interest rate is about 4.15% p.a. The deal seems fine to me. But since I haven't been involved in buying cars recently... So someone who has recently taken an auto loan could comment better.
	() Thanks

2nd January 2006, 18:47	#14
rapideffect BHPian Join Date: Jun 2005 Location: mumbai Posts: 147 Thanked: 4 Times	Also, check up with your bank about pre closure charges and terms for the same.I believe, ICICI is the highest in that lot and troublesome aslo. They charge 5% of the value as pre closure charges if you're willing to settle the entire loan at a future date. Also an intimation of settlement a month in advance also needed. Try to bargain on this.
	() Thanks

2nd January 2006, 19:57	#15
lamborghini Distinguished - BHPian Join Date: Apr 2004 Location: Mumbai Posts: 6,113 Thanked: 5,760 Times View My Garage	Hey guys, what is the rate of interest on a used car for 5 years? And on a new car? We are talking about an Elantra. Tenure : 5 years Loan Amount : 9.50 for new and 6.5 - 7L for second hand. I know this is offtopic but sorry. Also what should one pay for a 2005 Elantra?
	() Thanks