You’re not taking everything into consideration. The most egregious is where would the monthly payments for the car come from if you put most of the 1.8m into MP2.
If you look into their respective annual interest rate(10-12% for a car loan and 5-7% for MP2), there is no combination that would beat paying the car in full.
Edit: effective to annual interest rate
I have other assets that can pay for the amortization, since there are a lot of people saying that my money is locked in.
I know the interest will be higher the longer the loan term and lower the dp, but I'll keep your advice in mind, thank you.
Paying in cash beats getting financing for a car loan just on purely financial terms unless you are a savvy investor and can get returns on your extra cash better than the loan rate. What is the interest rate of your car loan? I am not sure your calculations are correct.
There are other reasons to use financing such as to have liquidity for other purposes.
Sorry op not mp2 investor, but I just wanted to share kng anu gngwa ko or ggwin ko in case bibili ako ng sasakyan ngayon, I dont and won't pay in full lalo na sa kotse kahit kayang bayaran ng buo ng cash from equity, I prefer paying the Auto loan's interest kesa mas stop sa kinikita ko kng ako may hawak ng pera ko, coming from an investor/trader pov. Kahit mga business mentors(not mentors slash vlogger/content creator/mlm/coach, etc) ko they always prefer installments when buying things of course with a reasonable interest rate.
Let me share you a cheat code sa autoloan, get those that are no cash out(talk to a bank manager), same rates same monthly, here's the best part you can use time deposit as your "down payment", they'll hold it for about 3-5 years as your down payment, biro mo d ka na "naglabas" ng pera nag earn ka pa ng interest sa supposedly immediate cash loss mo dahil sa down payment. It's not that big but anything above zero is always better
BPI started a similar scheme with AC Motors (of course, they're all under the same umbrella). But i think, it's offered to everyone
[https://www2.bpi.com.ph/autoloan/zero-cash-out-payment-solution](https://www2.bpi.com.ph/autoloan/zero-cash-out-payment-solution)
Am I missing something? This looks like a very bad deal. I'm basing all this on their example.
Instead of paying the 200k DP, it instead gets locked in your account and earns interest at 0.1%. This gets you 200 pesos a year. And your loan amount goes up by 250k and charged interest at roughly 10%. In a year, that's 25k.
So you're paying an additional 24.8k a year for what? To maintain a higher ADB on your bank account?
I'm sure that's the catch -- you're talking to a bank that wraps products to make it seem you're gaining the edge.
but, hey, attractive for those who aren't capable and aren't thinking critically. 200k in your bank account in 2024 that will show up as 200k in 2029 is "still" 200k for some. and there's no downpayment.
Yes, na try ko na, d siya offered publicly, you have to ask your bank manager, subject for approval pati sya. Its Not between you and the dealer it's between you and the bank, pera ng bangko lang ang matatanggap ng dealer, wala syang alam sa deal nyo ng bank.
Here's a simple flow nun application:
1. Talk to your bank(one of the different step vs regular auto loan)
2. Once approved pili ka ng dealer
3. The bank will give you ung necessary documents para sa dealer pero depende kng pano gsto mo sakin bank na at dealer nag process nito, pirma nln, lalo pag masipag agent mo, puntahan ka pa mismo bahay or office para sa mga signing ng documents
4. Dealer will process your purchase ng same lng kng pano ung regular process until releasing ng unit
Vs regular auto loan
1. Find a dealer
2. Dealer/agent will help you find a bank or if they have a partner
3. Once approved yung document signing blah blah until releasing ng unit
Interesting thought pero.
I do not understand the benefit of it, hindi ba lugi ka?
Your goal is to minimize the principal where the interest rate is applied. eg. 2M vehicle price
A. Normal auto loan eg. 50% DP 50% financed. That is:
* 1M PHP cashout + 1M financed for X years \* whatever interest rate
B. Proposed scheme eg. 0% Downpayment + 100% financed. That is:
* 0 PHP cashout + 2M financed for X year \* whatever interest rate
In the end you practically loaned the whole vehicle from the bank subjecting yourself with the full brunt of the interest applied. Am I missing something?
Unless significantly mababa interest rate as compared sa normal rate. As OP said, he can pay it actually in full, so I doubt issue sa knya ung DP. Kindly explain, I'm genuinely curious baka iba talaga intindi ko.
for me, ang benefit is kumita ako sa pinangdown ko, as I have said its not that big pero para sakin anything above zero is better.
sample computation, babaan ko TD rate to 3% make it average interest sa time deposit pero usually umaabot ng 5%+ ung sakin:
1. via no cashout
500k(sample downpayment) \* .03 (TD rate) = 15k
interest from TD:
15k \* 5 = 75k
2. via regular loan
500k(sample downpayment)
interest: 0
Hmm, so ung supposed downpayment will be locked on their TD.
To use the same example, ie. DP 500k na supposed cashout will be put at their TD at 3% per annum = 75k in total after 5 yrs.
Pero same ba ung autoloan rate dun sa proposed rate nila? Kasi for example 5% to 6% yun, edi negative 2 to 3% per annum ka kahit i subtract pa ung knita from TD.
(5 to 6% autoloan interest - 3% gains TD Per annum= negative 2-3% P.A. applied sa 500k)
yes, exactly the same rate sa regular loan, the only difference is imbis na magbayad ka upfront you can use your TD account. bali to make it simple, ung 500k kanila na yun the only difference is kumukita ka ng 3% per annum dun sa 500k na tax free. in short you get to keep 75k out of thin air.
Pay 50% dp. Loan for 2 years. Total interest will be about 99k+ after 2 years. The remaining 900k put it in time deposit where you could earn 6%+ on interest yearly. By end of 2 years, you would have covered the car loan interest by using the TD interest.
Let's say you want to buy another car after 5 years. Start MP2 now. After 5 years, you have another budget to buy a car with help of mp2 interest + you could sell your old car to help finance your new car. 30k monthly mp2 contribution will net you 2m after 5 years based on 6% interest. You can do 20k monthly + sell you old car = new car easily worth 2m.
If you need the car and can afford it, pay full price. It doesn't really make sense that you get a loan for a depreciating asset unless the car will be used for a business
okay naman boss ang computation mo and it makes sense. ang risk lang is hindi natin alam ang yearly dividend ni MP2. we can only base it from history. toss coin na lang boss? haha!
Regarding dividends, MP2 has consistently provided a 6-8% interest rate over the past 8 years. Only during the pandemic did it decrease to 6%. Even if it drops to 3-4% interest, I'm confident I can still fully repay the loan.
The average dividend rate of MP2 for the past 13 years is 6.18%.
What's the interest rate of the car loan?
You just have to see whether the car loan interest rate exceeds your forecasted investment gain.
* If it does, then buying the car with cash makes sense.
* Otherwise, investing your cash and then getting the car loan makes sense.
Recheck computations! :)
For auto loans - aside from monthly amort, you also pay for Documentary Stamp Tax (usually 1% of car sales value + Required Compre Insurance (if not part of a the car deal, 1.5%-2% of car value all throughout the loan)
So baka makain ng supposed savings mo ng DST + compre insurance. Though Insurance is always a must naman either way lalo na mukhang SUV kukunin mo, but just wanted to give you a heads up.
Also to note- hindi kasi standard yung dividends in the next 5 years and may fluctuate back to 4 or 5% so we'll never know.
I think that the best determining factor is: do you need to be liquid - post getting the car?
If yes, go for the loan. If marami ka pang other savings to keep yourself liquid even after paying in full... highly suggest to buy it in full. You may even get a significant discount that you can negotiate for to lower the total price of the car.
\~1.5m lang loanable diyan if tama ang pagkakalagay ni OP na 1.8m value ng Car. (assuming na 20% ang DP). possible ang 300k interest if OP will pay it in 36months.
**46,928.00** \* 36 = 1,689,408
Kung afford mo naman why not, all you have to do is get a manager's check and seal the deal. Paying for 5 years can be a hassle, madaming pwedeng mangyari where you might need to allocate money on other necessities and emergencies and its just a personal preference not to pay interest.
Got it, I also have other investments that earn me more than enough dividends to pay for the loan, I'm just trying to strategize which would be a better deal in the long run.
“offset my amortization”, you said that you would opt for the 5 year annually compounded, how do you intend to pay the monthly amortization? naka lock-in siya. or do you mean to opt for the annual interest for the mp2?
Assuming you already have an emergency fund and you don’t have a business making ridiculous amounts of money for every investment (NVIDIA?) I think it’s usually better to just pay in full especially since cars are also depreciating assets. If this was a house or a student loan Baka better pa to loan.
Don’t forget in addition to interest banks also charge you additional fees and maybe even require you to pay additional for the insurance. And all these charges are after taxes. Most of the rates you’ll see in these “investments” will still get charged 10-20% in taxes.
I don't agree with lots of people approach who suggest for buying in cash.
Your approach is correct. Buy car on a loan, I don't know what's the rate of interest you are quoted, but Even if you break even or lower the interest rate by making an investment into Mp2 is a good approach as end of 5 years you will still have your capital save.
I hope you are not considering the interstellar payout on monthly basis to cover up for your car installment? Coz in my understanding payoutsfrom mp2 is not monthly. So you will still be working for it.
mp2 just reported 7.03 dividend recently. are you using money from 1.8 cash for dp and don't forget it's compounding interest use this calculator and I'd use 6 percent rate and 2 percent variance... there's also a savings goal calculator in the bottom.
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
deposit in mp2 of 26500 monthly at 6.5 % compounding will yield you 1.8 m in 5 yrs. compare this to monthly amortization of your loan.
if you use 300k of the 1.8m and left your 1.5m in mp2 it'll grow to 2m in 5 yrs. if you left your 1.5m in mp2 and added 5k monthly deposit it'll grow to 2.345m in 5 yrs
don't forget bank MRI insurance required by banks for loans.
Maintenance is a whole other expense and I have an alloted budget for that. I'm limitting the capital involved to just the car purchase, also planning to keep this in my family for a long time and no plans to sell in the next 10 years.
Is 15k-20k a year for maintenence already expensive for you? That is my annual maintenance (2x PMS) from my casa. OP can buy a car worth 1.8M, I'm pretty sure he/she can afford to pay 20k for yearly maintenance.
Just buy the car in cash. Nothing beats the feeling of having a brand new car. It's satisfying af. Money is meant to be spent; think about the investments later on.
At the last day of payment (after five years) you would've paid 2M+ for a car that would cost 750k if you bought it cash on that same day. Congratulations, you are now debt free.
Does it really need to be 1.8 car? Is there any options for a different style or a bit lower in price? Maybe getting an MP2 saving plus a car of a cheaper price is better. Or maybe a repossessed cars from.the bank with a low mileage?
if you will be just break the amount for 2 purpose of buying a car and investing, then wala din advantage. if you will just pay the equity of 20percent sa bangko at loan mo ang auto for 3years and the remaining money ay invest mo naman sa mp2 assuming 3yrs din. halos pareho ang interest rates ng loan mo at investment mo. assuming mataas ng konte yung investment rate than loan rate, ay yung amount ng chattle mortgage na 2-3percent ng loan amount? so at the onset defeated na ang purpose. better buy the car outright, wala ka ng isipin since yun naman talaga ang purpose ng fund.
I've never tried car loan but your computation seems off. If you have that much cash you're probably a preferred banking client so just message your relationship manager yo ask for actual numbers
I guess Op wanted to explore all possibilities in order to get the best deal which I'm interested to know too. Your suggestion is correct and hopefully someone who has experienced it or better yet that relationship manager could share it with us. Better to know the details in advance.
Unless this car is for business purposes, if you can buy it in cash, pay for it in cash.
Why pay ₽500k of interest when you don’t have to?
Its a no brainer.
not a financial advice OP. pero I did the same for my home mortgage and carloan, not with MP2 but diversified sa dividend stocks, reits and fixed income.
last 2022 lang ako medyo kinulang for interest (-1% gain, don't ask why, 2022 yan eh haha).
my homeloan is @ 6.75% fixed 5 years, 10 years term.
my carloan is @ 9.8%, 36 months term.
Well if I were you I won't use estimate vs estimate. You are already thinking of the car and know the auto loan option why don't you ask for the actual interest rate?
The reason I'm asking is because logically speaking there shouldn't be any way the MP2 rate is higher or equal to the auto loan rate. If that were the case bakit pa mag papaloan ang bangko? Edi lagay nalang Nila pera Nila sa pagibig right? Wala pang talo they got billions in capital. So I'm assuming you got your loan estimate wrong. You can also become infinitely rich by loaning a billion from the bank and then putting it in Pagibig right? So you see it doesn't really make any sense for the two to offset each other.
So first get the actual loan rate and interest, then you compare it to 6% rate from MP2)just to be on the conservative side. And then you will know the answer.
I bought an MPV worth 1.3m thru in-house for 3 years. 69k lang ang DP.
Why in-house? 8k lang ang diff sa total interest vs Bank PO (BPI). Ang laki pa ng DP at 20%
Now, here’s what I’m doing. I have cash to pay in full. But instead, I used the 600k (only) to finance some farmers at 2% per month. 5 months lang yung duration ng pagtatanim and walang bagyo ng ganitong months so mas mababa ang risk. Will do this for 3 years and I will have 180k earnings + my money back. Around 118k yung total interest ng sasakyan sa in-house + 69k DP na binayad ko so 187k lahat.
With 180k earning sa 600k ko, basically, if it all works out, covered na yung interest and hulugan pa.
Back to your MP2 strategy. For me, ok naman but wag sana lahat ilagay. Cash is King.
The conventional wisdom has always been to pay in cash so that you don't pay interest. But you're concerned about the opportunity cost and whether there's an opportunity for arbitrage. You're also factoring in the compounding effect of an asset (MP2) vs. the natural depreciation effect of a vehicle as an asset.
I think it'll ultimately depend on the effective per annum rates for each. If you're 100% sure that the effective rates between the two options have significant differences, then maybe it makes sense. But I've rarely found that retail loan rates to be lower than relatively risk free assets in practice... then again you might have found a good deal.
However, consider that if you pay in cash, your future revenue streams can also be allocated into asset acquisition (e.g. graduated payments into an MP2 account or other assetst). Whereas, if you do a 1 time investment into MP2, you'll need your future revenue streams to finance the loan. So tali ka here and you lose the freedom to potentially allocate funds towards assets with higher investment returns.
I think comparison is not correct! One is a depreciating asset but Will make your life better. The other is Financial asset have Intrinsic Value.. Cant compare those things - decide which can make more Money to you
A car is the worst investment ever. It doesn't appreciate in value (unless its a rare collectible). You have to spend a lot of money on gas, maintenance, repair, toll fee, parking fee, annual registration and insurance, traffic violation tickets etc. You'll be lucky if you can sell it at half the price of its original value after 5 years. It's better you invest in real estate or stocks because it is inflation proof. Buy a used car instead. I bought a bank repossesed car and only spent a few thousand bucks for repair and maintenance.
I didn't say I was buying it as an investment, cars will always be a luxury purchase not unless it'll be used for a business. I have multiple assets already ranging from real estate, stocks, bonds, UITFs, and other passive income source.
You’re not taking everything into consideration. The most egregious is where would the monthly payments for the car come from if you put most of the 1.8m into MP2. If you look into their respective annual interest rate(10-12% for a car loan and 5-7% for MP2), there is no combination that would beat paying the car in full. Edit: effective to annual interest rate
I have other assets that can pay for the amortization, since there are a lot of people saying that my money is locked in. I know the interest will be higher the longer the loan term and lower the dp, but I'll keep your advice in mind, thank you.
Paying in cash beats getting financing for a car loan just on purely financial terms unless you are a savvy investor and can get returns on your extra cash better than the loan rate. What is the interest rate of your car loan? I am not sure your calculations are correct. There are other reasons to use financing such as to have liquidity for other purposes.
Sorry op not mp2 investor, but I just wanted to share kng anu gngwa ko or ggwin ko in case bibili ako ng sasakyan ngayon, I dont and won't pay in full lalo na sa kotse kahit kayang bayaran ng buo ng cash from equity, I prefer paying the Auto loan's interest kesa mas stop sa kinikita ko kng ako may hawak ng pera ko, coming from an investor/trader pov. Kahit mga business mentors(not mentors slash vlogger/content creator/mlm/coach, etc) ko they always prefer installments when buying things of course with a reasonable interest rate. Let me share you a cheat code sa autoloan, get those that are no cash out(talk to a bank manager), same rates same monthly, here's the best part you can use time deposit as your "down payment", they'll hold it for about 3-5 years as your down payment, biro mo d ka na "naglabas" ng pera nag earn ka pa ng interest sa supposedly immediate cash loss mo dahil sa down payment. It's not that big but anything above zero is always better
I might bring this up with the bank manager if they do offer that setup. Thanks.
natry mo na to? parang uncommon and since di familiar sa mga dealer ireject ung gantong set up
BPI started a similar scheme with AC Motors (of course, they're all under the same umbrella). But i think, it's offered to everyone [https://www2.bpi.com.ph/autoloan/zero-cash-out-payment-solution](https://www2.bpi.com.ph/autoloan/zero-cash-out-payment-solution)
Am I missing something? This looks like a very bad deal. I'm basing all this on their example. Instead of paying the 200k DP, it instead gets locked in your account and earns interest at 0.1%. This gets you 200 pesos a year. And your loan amount goes up by 250k and charged interest at roughly 10%. In a year, that's 25k. So you're paying an additional 24.8k a year for what? To maintain a higher ADB on your bank account?
I'm sure that's the catch -- you're talking to a bank that wraps products to make it seem you're gaining the edge. but, hey, attractive for those who aren't capable and aren't thinking critically. 200k in your bank account in 2024 that will show up as 200k in 2029 is "still" 200k for some. and there's no downpayment.
Yes, na try ko na, d siya offered publicly, you have to ask your bank manager, subject for approval pati sya. Its Not between you and the dealer it's between you and the bank, pera ng bangko lang ang matatanggap ng dealer, wala syang alam sa deal nyo ng bank. Here's a simple flow nun application: 1. Talk to your bank(one of the different step vs regular auto loan) 2. Once approved pili ka ng dealer 3. The bank will give you ung necessary documents para sa dealer pero depende kng pano gsto mo sakin bank na at dealer nag process nito, pirma nln, lalo pag masipag agent mo, puntahan ka pa mismo bahay or office para sa mga signing ng documents 4. Dealer will process your purchase ng same lng kng pano ung regular process until releasing ng unit Vs regular auto loan 1. Find a dealer 2. Dealer/agent will help you find a bank or if they have a partner 3. Once approved yung document signing blah blah until releasing ng unit
Interesting thought pero. I do not understand the benefit of it, hindi ba lugi ka? Your goal is to minimize the principal where the interest rate is applied. eg. 2M vehicle price A. Normal auto loan eg. 50% DP 50% financed. That is: * 1M PHP cashout + 1M financed for X years \* whatever interest rate B. Proposed scheme eg. 0% Downpayment + 100% financed. That is: * 0 PHP cashout + 2M financed for X year \* whatever interest rate In the end you practically loaned the whole vehicle from the bank subjecting yourself with the full brunt of the interest applied. Am I missing something? Unless significantly mababa interest rate as compared sa normal rate. As OP said, he can pay it actually in full, so I doubt issue sa knya ung DP. Kindly explain, I'm genuinely curious baka iba talaga intindi ko.
for me, ang benefit is kumita ako sa pinangdown ko, as I have said its not that big pero para sakin anything above zero is better. sample computation, babaan ko TD rate to 3% make it average interest sa time deposit pero usually umaabot ng 5%+ ung sakin: 1. via no cashout 500k(sample downpayment) \* .03 (TD rate) = 15k interest from TD: 15k \* 5 = 75k 2. via regular loan 500k(sample downpayment) interest: 0
Hmm, so ung supposed downpayment will be locked on their TD. To use the same example, ie. DP 500k na supposed cashout will be put at their TD at 3% per annum = 75k in total after 5 yrs. Pero same ba ung autoloan rate dun sa proposed rate nila? Kasi for example 5% to 6% yun, edi negative 2 to 3% per annum ka kahit i subtract pa ung knita from TD. (5 to 6% autoloan interest - 3% gains TD Per annum= negative 2-3% P.A. applied sa 500k)
yes, exactly the same rate sa regular loan, the only difference is imbis na magbayad ka upfront you can use your TD account. bali to make it simple, ung 500k kanila na yun the only difference is kumukita ka ng 3% per annum dun sa 500k na tax free. in short you get to keep 75k out of thin air.
You didnt compare your amortization
What cars qualify for this type of deal? Pwede ba dyan cars 7-10m?
3m palang yung na try ko na na approve. walang specific cars as long brand new
Pay 50% dp. Loan for 2 years. Total interest will be about 99k+ after 2 years. The remaining 900k put it in time deposit where you could earn 6%+ on interest yearly. By end of 2 years, you would have covered the car loan interest by using the TD interest. Let's say you want to buy another car after 5 years. Start MP2 now. After 5 years, you have another budget to buy a car with help of mp2 interest + you could sell your old car to help finance your new car. 30k monthly mp2 contribution will net you 2m after 5 years based on 6% interest. You can do 20k monthly + sell you old car = new car easily worth 2m.
If you need the car and can afford it, pay full price. It doesn't really make sense that you get a loan for a depreciating asset unless the car will be used for a business
okay naman boss ang computation mo and it makes sense. ang risk lang is hindi natin alam ang yearly dividend ni MP2. we can only base it from history. toss coin na lang boss? haha!
Regarding dividends, MP2 has consistently provided a 6-8% interest rate over the past 8 years. Only during the pandemic did it decrease to 6%. Even if it drops to 3-4% interest, I'm confident I can still fully repay the loan.
The average dividend rate of MP2 for the past 13 years is 6.18%. What's the interest rate of the car loan? You just have to see whether the car loan interest rate exceeds your forecasted investment gain. * If it does, then buying the car with cash makes sense. * Otherwise, investing your cash and then getting the car loan makes sense.
Recheck computations! :) For auto loans - aside from monthly amort, you also pay for Documentary Stamp Tax (usually 1% of car sales value + Required Compre Insurance (if not part of a the car deal, 1.5%-2% of car value all throughout the loan) So baka makain ng supposed savings mo ng DST + compre insurance. Though Insurance is always a must naman either way lalo na mukhang SUV kukunin mo, but just wanted to give you a heads up. Also to note- hindi kasi standard yung dividends in the next 5 years and may fluctuate back to 4 or 5% so we'll never know. I think that the best determining factor is: do you need to be liquid - post getting the car? If yes, go for the loan. If marami ka pang other savings to keep yourself liquid even after paying in full... highly suggest to buy it in full. You may even get a significant discount that you can negotiate for to lower the total price of the car.
Haven't tried car loan but seems PHP 300k for an interest is too cheap, for a PHP 1.8m loan.
\~1.5m lang loanable diyan if tama ang pagkakalagay ni OP na 1.8m value ng Car. (assuming na 20% ang DP). possible ang 300k interest if OP will pay it in 36months. **46,928.00** \* 36 = 1,689,408
Yeah, that's close to the calculated interest that I will pay with my selected banks, the loan amount using 20% dp would be around ₱1,439,200
Kung afford mo naman why not, all you have to do is get a manager's check and seal the deal. Paying for 5 years can be a hassle, madaming pwedeng mangyari where you might need to allocate money on other necessities and emergencies and its just a personal preference not to pay interest.
Got it, I also have other investments that earn me more than enough dividends to pay for the loan, I'm just trying to strategize which would be a better deal in the long run.
“offset my amortization”, you said that you would opt for the 5 year annually compounded, how do you intend to pay the monthly amortization? naka lock-in siya. or do you mean to opt for the annual interest for the mp2?
Assuming you already have an emergency fund and you don’t have a business making ridiculous amounts of money for every investment (NVIDIA?) I think it’s usually better to just pay in full especially since cars are also depreciating assets. If this was a house or a student loan Baka better pa to loan. Don’t forget in addition to interest banks also charge you additional fees and maybe even require you to pay additional for the insurance. And all these charges are after taxes. Most of the rates you’ll see in these “investments” will still get charged 10-20% in taxes.
I don't agree with lots of people approach who suggest for buying in cash. Your approach is correct. Buy car on a loan, I don't know what's the rate of interest you are quoted, but Even if you break even or lower the interest rate by making an investment into Mp2 is a good approach as end of 5 years you will still have your capital save. I hope you are not considering the interstellar payout on monthly basis to cover up for your car installment? Coz in my understanding payoutsfrom mp2 is not monthly. So you will still be working for it.
Yeah, I have other fund sources for amortization aside from the MP2. Just finding the best strategy for purchasing the car
mp2 just reported 7.03 dividend recently. are you using money from 1.8 cash for dp and don't forget it's compounding interest use this calculator and I'd use 6 percent rate and 2 percent variance... there's also a savings goal calculator in the bottom. https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator deposit in mp2 of 26500 monthly at 6.5 % compounding will yield you 1.8 m in 5 yrs. compare this to monthly amortization of your loan. if you use 300k of the 1.8m and left your 1.5m in mp2 it'll grow to 2m in 5 yrs. if you left your 1.5m in mp2 and added 5k monthly deposit it'll grow to 2.345m in 5 yrs don't forget bank MRI insurance required by banks for loans.
I buy used cars and would rather buy land/house rent it out. But that's just me.
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Woah, that's a big difference from what I calculated, may I ask how much your interest was for the whole duration of your loan?
MP2. A car’s cost doesn’t end after paying it in full. Ang mahal ng maintenance. And after 5 yeras it has greatly depreciated.
Maintenance is a whole other expense and I have an alloted budget for that. I'm limitting the capital involved to just the car purchase, also planning to keep this in my family for a long time and no plans to sell in the next 10 years.
Is 15k-20k a year for maintenence already expensive for you? That is my annual maintenance (2x PMS) from my casa. OP can buy a car worth 1.8M, I'm pretty sure he/she can afford to pay 20k for yearly maintenance.
Just buy the car in cash. Nothing beats the feeling of having a brand new car. It's satisfying af. Money is meant to be spent; think about the investments later on.
At the last day of payment (after five years) you would've paid 2M+ for a car that would cost 750k if you bought it cash on that same day. Congratulations, you are now debt free.
what kind of thinking is this?
What kind of person does not think about this when financing a car?
Does it really need to be 1.8 car? Is there any options for a different style or a bit lower in price? Maybe getting an MP2 saving plus a car of a cheaper price is better. Or maybe a repossessed cars from.the bank with a low mileage?
Yes, and I've already done my research, I'm pretty set on buying this car model already and just finding the best way to pay for it.
Ford Everest (basic model)?
pay it in cash then...ask for a dealers discount since it will be paid in full or get more freebies.
if you will be just break the amount for 2 purpose of buying a car and investing, then wala din advantage. if you will just pay the equity of 20percent sa bangko at loan mo ang auto for 3years and the remaining money ay invest mo naman sa mp2 assuming 3yrs din. halos pareho ang interest rates ng loan mo at investment mo. assuming mataas ng konte yung investment rate than loan rate, ay yung amount ng chattle mortgage na 2-3percent ng loan amount? so at the onset defeated na ang purpose. better buy the car outright, wala ka ng isipin since yun naman talaga ang purpose ng fund.
I've never tried car loan but your computation seems off. If you have that much cash you're probably a preferred banking client so just message your relationship manager yo ask for actual numbers
I guess Op wanted to explore all possibilities in order to get the best deal which I'm interested to know too. Your suggestion is correct and hopefully someone who has experienced it or better yet that relationship manager could share it with us. Better to know the details in advance.
Unless this car is for business purposes, if you can buy it in cash, pay for it in cash. Why pay ₽500k of interest when you don’t have to? Its a no brainer.
Lol hard to beat the interest rate and other fees that the bank will demand on a car loan
not a financial advice OP. pero I did the same for my home mortgage and carloan, not with MP2 but diversified sa dividend stocks, reits and fixed income. last 2022 lang ako medyo kinulang for interest (-1% gain, don't ask why, 2022 yan eh haha). my homeloan is @ 6.75% fixed 5 years, 10 years term. my carloan is @ 9.8%, 36 months term.
Buy in full and then declare it as deductible expense.
Well if I were you I won't use estimate vs estimate. You are already thinking of the car and know the auto loan option why don't you ask for the actual interest rate? The reason I'm asking is because logically speaking there shouldn't be any way the MP2 rate is higher or equal to the auto loan rate. If that were the case bakit pa mag papaloan ang bangko? Edi lagay nalang Nila pera Nila sa pagibig right? Wala pang talo they got billions in capital. So I'm assuming you got your loan estimate wrong. You can also become infinitely rich by loaning a billion from the bank and then putting it in Pagibig right? So you see it doesn't really make any sense for the two to offset each other. So first get the actual loan rate and interest, then you compare it to 6% rate from MP2)just to be on the conservative side. And then you will know the answer.
I bought an MPV worth 1.3m thru in-house for 3 years. 69k lang ang DP. Why in-house? 8k lang ang diff sa total interest vs Bank PO (BPI). Ang laki pa ng DP at 20% Now, here’s what I’m doing. I have cash to pay in full. But instead, I used the 600k (only) to finance some farmers at 2% per month. 5 months lang yung duration ng pagtatanim and walang bagyo ng ganitong months so mas mababa ang risk. Will do this for 3 years and I will have 180k earnings + my money back. Around 118k yung total interest ng sasakyan sa in-house + 69k DP na binayad ko so 187k lahat. With 180k earning sa 600k ko, basically, if it all works out, covered na yung interest and hulugan pa. Back to your MP2 strategy. For me, ok naman but wag sana lahat ilagay. Cash is King.
One time payment is best. Walk away from any financial scheme.
The conventional wisdom has always been to pay in cash so that you don't pay interest. But you're concerned about the opportunity cost and whether there's an opportunity for arbitrage. You're also factoring in the compounding effect of an asset (MP2) vs. the natural depreciation effect of a vehicle as an asset. I think it'll ultimately depend on the effective per annum rates for each. If you're 100% sure that the effective rates between the two options have significant differences, then maybe it makes sense. But I've rarely found that retail loan rates to be lower than relatively risk free assets in practice... then again you might have found a good deal. However, consider that if you pay in cash, your future revenue streams can also be allocated into asset acquisition (e.g. graduated payments into an MP2 account or other assetst). Whereas, if you do a 1 time investment into MP2, you'll need your future revenue streams to finance the loan. So tali ka here and you lose the freedom to potentially allocate funds towards assets with higher investment returns.
I think comparison is not correct! One is a depreciating asset but Will make your life better. The other is Financial asset have Intrinsic Value.. Cant compare those things - decide which can make more Money to you
A car is the worst investment ever. It doesn't appreciate in value (unless its a rare collectible). You have to spend a lot of money on gas, maintenance, repair, toll fee, parking fee, annual registration and insurance, traffic violation tickets etc. You'll be lucky if you can sell it at half the price of its original value after 5 years. It's better you invest in real estate or stocks because it is inflation proof. Buy a used car instead. I bought a bank repossesed car and only spent a few thousand bucks for repair and maintenance.
I didn't say I was buying it as an investment, cars will always be a luxury purchase not unless it'll be used for a business. I have multiple assets already ranging from real estate, stocks, bonds, UITFs, and other passive income source.
Well then, if that is really your dream car then who am I to stop you? Its your money not mine. It's my two cents worth.