#BounceExclusive: How To Get A Cheap Car Loan (3)
This story is in continuation of our series on how to get an affordable auto loan in Nigeria.
In the previous editions, we told you what to look out for while getting a car loan, including the primary requirements.
Bounce News also told you what happens during the process of choosing a car.
In this edition, we bring you what it actually costs you to obtain and service a car loan.
In the financing process, there is a percentage of equity contribution that you must make.
For instance, on Tokunbo cars, it starts from 30%. You can contribute as much as you want but the minimum is usually within the 30% range.
For the Tokunbo cars, you have a maximum of 31 months, that is, 2 years and 7 months, to pay back. Some companies can have more or lesser tenor.
Within this period, you may decide to pay off the loan if you chance upon bulk cash but that is not usually before the 6th month of the loan tenor.
But if you decide to stick to the tenor, then you should get ready to service the loan facility.
The cost of servicing the loan facility includes but not limited to the following:
The interest rate on Tokunbo car loan for instance could be 20% per annum of the 70% equity contribution depending on the lease company.
Lease companies usually do not charge you per month. They charge interest rate per annum.
For example, if your cost 2 million naira and you have 2 years to pay back, the 20% interest rate will be spread over the 2 years.
But if you have contributed 30%, which translates to 600,000 naira, this leaves the money you owe the lease company at 1.4 million naira.
Also Read: How To Get A 'Cheap' Car Loan (1)
If the company spreads the 1.4 million naira across 24 months, you will have to pay about 58,000 naira back every month.
On the interest, you will pay 20% of 1.4 million naira in the first month, but in the second month, you will be paying 20% of 1,342,000 naira, which is less 58,000 naira paid in the first month. The more you pay back, the lesser the interest you pay.
However, the interest rates offered to you is also not cast in stone as the lease company, especially if it is a bank, often have a condition in the offer letter that allows it to increase the rate depending on 'economic conditions'.
Depending on the lease company, you will be required to pay not less than a 4% insurance fee.
It is important to note that the insurance fee is not on the lease company’s or your equity contribution. It is based on the value of the car.
While some lease companies may allow your pay over the tenor period, others may insist you pay up once.
3. Legal Fees:
You will pay a legal fee added with stamp duty, upfront processing fee of about 3.8%. But that is usually a one-off payment.
This is usually paid at the beginning of the transaction as the lease company will inculcate it into the 30% upfront equity contribution that you paid in the initial stage.
Also Read: How To Get A 'Cheap' Car Loan (2)
Some other fees inculcated into the upfront fee include: registration fee because the vehicle would have to be registered by the lease company.
4. Management Fee:
Have you ever heard of the phrase: "No hidden charges"? In real business life, there is no such thing.
There is always the exclusive list of management fees that you have to pay simply because someone in business must make something for himself.
So, as far as your auto financing goes, you will still be required to pay a management fee of 1.75% of the 70% equity contributed by the lease company.
In all, let’s say you have taken a loan facility of 2 million naira for your car, by the time the tenor expires, you should have paid approximately 2.8 million naira.
These includes the processing fees, insurance, management fees and interest rate payments. So help you God!