Adice Pls - Finance Car & Put Money Into Property Back Home

[rack201]

Hi All

I'm about to buy a car here in Thailand and also an investment property back home in Australia. Can anyone help me understand whether I am better off buying a car in cash here, and borrowing more back home for the investment, or financing the car here and putting the cash into the investment property...?

Say the interest rate in Australia is 8%pa. Toyota finance gives roughly 3% but I dont think this is an apples and apples comparison - its a different calculation here?? I'd expect to be in LOS for another 3 years.. then sell the car.

Hope you guys can explain it to me - im a little hopeless when it comes to money matters.

Cheers

Edited May 26, 2007 by rack201

[Meerkat]

Car loans here are (usually) not amortised over the tenor of the loan. The 3% you quoted would thus be charged on the initial loan amount for the entire duration, rather than reducing each month as you gradually pay off the capital. So if you're looking at taking a car loan out, chuck the numbers into a spreadsheet to work out exactly what the loan will cost you. It may well be worth you borrowing more from your mortgager in order to pay cash for the car (although I doubt it - car loans here seem to be pretty good value).

We did take out a loan for our last Toyota because the rates worked out in our favour. Similarly, we took out a mortgage on our latest house we bought (here in Thailand) because the initial fixed rates for 3 years were incredibly cheap, and the early redemption penalties ended at precisely the time the rates moved from fixed to floating (at about MLR+200bp IIRC!), so we are now in effect lending money to Bangkok Bank (via term deposits) at a greater rate than they are lending money to us for the house. After the initial fixed term is up, we'll simply pay off the mortgage at no penalty!

[Guest madcow]

Any expenses associated with your investment property are tax deductible , including interest .

The car will depreciate , the house will appreciate .( In value )

Borrowing money to buy a depreciating item is throwing money down the drain .

[Meerkat]

Borrowing money to buy a depreciating item is throwing money down the drain .

Not necessarily. If you can borrow the money for less than you can lend it (given that you're going to buy the depreciating asset anyway, as the OP has indicated), then you might as well borrow it and make your extra cash-in-hand work for you.

[rack201]

Borrowing money to buy a depreciating item is throwing money down the drain .

Not necessarily. If you can borrow the money for less than you can lend it (given that you're going to buy the depreciating asset anyway, as the OP has indicated), then you might as well borrow it and make your extra cash-in-hand work for you.

Thanks for the replies. The quote above kinda sums up what I was trying to determine.

Anyhow, plugging the numbers into Excel tells me that the 3.3% Toyota finance, is equivalent to a 6% regular amortized loan backhome. This is comparible with a home loan so I will probably pay cash for the car.

Next question is - all my funds are in AU dollars at home - whats the best way to pay for the car?

Cheers

[Gary A]

Car interest here in Thailand is quite easy to figure out. It's add on. If they tell you five percent, take five percent times what you borrow, multiply that times the number of years and add the total onto what you borrow. That total is what you pay. No discount for early payoff. It stinks! I did finance a new car recently but it was a zero percent no interest deal from Ford. My money is earning a little over eight percent in the US so I figure I got an additional eight percent discount.

I didn't buy the car I wanted because the dealer tried to run one on me. He told my wife the interest rate was .84 percent. He really didn't lie but the .84 percent was PER month. Had my wife been alone she would have paid the equivalent of ten percent and thought she got a good deal. I did lose the thousand baht deposit she put down to hold the car until I looked over the deal.