Settling The Bill With The Finance Company After Car Theft

[frtiz]

Hi Guys,

My car got stolen in April this year and the police, insurance and Nissan Leasing all took their time to pick their noses and finally they've come up with a calculation to settle the outstanding balance.

To cut a long story short at the dealership a 'not so nice' lady from Nissan leasing calculated the interest rate as follows: 2,89% over the full amount times the number of years in our case 4.

So that's of course a rip off but normal practice here in Thailand. However, now when they're settling the balance with what we owed them and how much the insurance paid up they've come up with another weird story.

First of all, we are supposed to get a discount on the interest of 50% over the remaining number of installments. However, they cut us short a substantial amount of money as they say that the amount of interest incrementally is reduced over the total amount, (i.e., the normal way of calculating interest over a loan in which you pay less interest every month). So they are conning us twice. First by taking the full amount of interest over the total amount when we have to pay it, and now using a calculation that is beneficial to them when they have to pay us.

Steam is coming out of my ears by now and I'm really losing my patience. When asking about this strange way of calculating things the woman at Nissan leasing just bluntly says:"mai luh". And that's all that comes out of here except for some other verbal watery bowel movement end products.

Is this normal practice in Thailand or are we being done big time here?

Thanks in advance

Fritz

[frtiz]

Oh yeah,

For those who contributed in my previous topic on buying a new car thanks for all your contributions. I just picked up my new Honda City last week and I'm really happy with it.

Thanks!

[basjke]

Sorry to hear this but yes this is the way they calculate in Thailand.I also found out the hard way when i repaid a finance before the expiry date.

They always calculate the interest on the full amount during the whole loan period.Then they divide it in a way that the early installements contain more interest then the later ones.That way they are always the winner as they get the full amount of interest already maybe a year before the finance expires.So if you decide to pay back early they don't lose any interest as they got it already.

[frtiz]

Sorry to hear this but yes this is the way they calculate in Thailand.I also found out the hard way when i repaid a finance before the expiry date.

They always calculate the interest on the full amount during the whole loan period.Then they divide it in a way that the early installements contain more interest then the later ones.That way they are always the winner as they get the full amount of interest already maybe a year before the finance expires.So if you decide to pay back early they don't lose any interest as they got it already.

Is there any way that a deal can be made with them?

[rizla]

Sorry to hear this but yes this is the way they calculate in Thailand.I also found out the hard way when i repaid a finance before the expiry date.

They always calculate the interest on the full amount during the whole loan period.Then they divide it in a way that the early installements contain more interest then the later ones.That way they are always the winner as they get the full amount of interest already maybe a year before the finance expires.So if you decide to pay back early they don't lose any interest as they got it already.

Is there no way to combat this, as yes i was told if i early settled, i would only pay 50% of the remaining intrest...? but what you are saying is they work on a sliding type scale...

One way i suppose would be if you forsee you might early settle, get the loan over the longest period possible and that way not too many payments made before you settle early...what you think

Edited June 21, 2010 by rizla

[frtiz]

Sorry to hear this but yes this is the way they calculate in Thailand.I also found out the hard way when i repaid a finance before the expiry date.

They always calculate the interest on the full amount during the whole loan period.Then they divide it in a way that the early installements contain more interest then the later ones.That way they are always the winner as they get the full amount of interest already maybe a year before the finance expires.So if you decide to pay back early they don't lose any interest as they got it already.

Is there no way to combat this, as yes i was told if i early settled, i would only pay 50% of the remaining intrest...? but what you are saying is they work on a sliding type scale...

Well that's what I'm going to find out over the next couple of days. We're going to contact a couple of Nissan Leasing people and ask them about it. Also the contract only supports the first way of calculating things and says nothing about the sliding scale type. I don't know but where I come from they call this fraudulent practice/ willingly misinforming customers. We have asked about this when we signed the contract and were 'assured' this would be the case. My case stinks as the police seems to know more than we do and whenever asked they just give us a faint smile.

We might consider claiming the whole amount of money, invest it, take the interest and leave the deal as it is now and pay the interest every month now that they have concealed how it works. We have ways to make way more money with 430K than the interest is worth. The contract doesn't mention anything about terminating the lease when a car gets stolen.

[aussiebebe]

Sorry to hear about the car being stolen, the same thing happened to me four years ago, but my experience was completely different so I'd have to say, no, what's happening about this dual-interest rate policy isn't normal practice in Thailand - it sounds like collusion between the insurance and finance companies, but maybe I've misunderstood the post.

I bought a second-hand Toyota, with financing from Kiatnakin Bank and insurance from 'Thai Insurance', it wasn't through a broker or through Thai visa (which I knew nothing back then) I let the dealer sort it for me. It was a 'hire-purchase' deal where the monthly installments were calculated at the onset. The insurance documents clearly stated what the payout would be in the event of fire or theft. It took four days and a 1500baht 'fee' to get the police report, I continued paying the installments for 3 months (as one would do in the West) and six months after the theft the insurance company gave me a cheque for the pay-out minus the money owed to the finance company. There was a 500b fee to cancel the registration plates.

I'm interested that the finance company in the OP's case is recalculating the interest - presumably because they owe themselves. It's really weird because the insurance company should just pay out xxx baht and clear the owed amount with the finance company (who must surely legally own the car). Very strange.

[steelepulse]

>>interest incrementally is reduced over the total amount, (i.e., the normal way of calculating interest over a loan in which you pay less interest every month). So they are conning us twice. First by taking the full amount of interest over the total amount when we have to pay it, and now using a calculation that is beneficial to them when they have to pay us.

Talking out of both sides of their mouth comes to mind. When you pay on finance, you pay interest on the amount borrowed throughout the whole loan repayment period, yet what you owe as principal decreases. In theory each monthly installment is the same over the period of the loan in regards to ratio of interest to principal. So for them to turn around and say sliding scale when in reality it isn't seems like a screw over job. I'd ask them to see their amortization table on the payments .

[frtiz]

Well it seems to be normal practice among the bigger companies in Thailand. My wife went to 5 different leasing companies today and pretended she wanted to buy a car through a lease purchase/hire purchase.

When asked about the options for paying off the car after one year she was presented with exactly the same calculations as we have been in our situation. The showrooms tend to calculate it on a fixed rate, deceiving you with a sort of mock transparency, and the finance companies just do it in their own ways, i..e, letting you pay the bulk of interest over the first year and conveniently conning you out of cash in case you want to pay the whole amount later on. Unfortunately this is also the case when your car gets stolen as the insurance pays the leasing company first and then you have to settle the bill with them. So they can just take whatever they please and leave you dangling on a thread begging for the last couple of baht after people have already skinned you of all you had.

We asked a sort of ombudsman in Bangkok who deals with these kind of things and they said we stand no chance in fighting it as they have waterproof contracts at their head office. Please be informed that the contract that you have signed is significantly different from what is stated in their general terms. And there seems to be a line in the contract that refers to this overruling all other things.

However, policies change from company to company and we got the idea that the smaller companies might actually be more upfront and honest about their calculations. Too bad it turned out sour for us.

So based on the current experience I would suggest people leave Nissan Leasing for what it is. If you are inclined to buy a nissan, buy it cash but never ever fall in the trap of their shady business. This also counts for the company run Isuzu schemes and some of the Toyota finance schemes. Honda leasing is working in the same way and can't be trusted either.

Too bad people and companies have the tendency to screw you over even more after you have already been put through misery. They've been soothing their conscious by saying that I was lucky to survive it and that I shouldn't worry about the money. They are more than helpful in taking even more from you. The worst part is that the shallow and indifferent cattle that works for these companies are even worse and just go home at night not caring about anything as long as they get their bowl in the morning and at night.

Edited June 22, 2010 by frtiz

[frtiz]

>>interest incrementally is reduced over the total amount, (i.e., the normal way of calculating interest over a loan in which you pay less interest every month). So they are conning us twice. First by taking the full amount of interest over the total amount when we have to pay it, and now using a calculation that is beneficial to them when they have to pay us.

Talking out of both sides of their mouth comes to mind. When you pay on finance, you pay interest on the amount borrowed throughout the whole loan repayment period, yet what you owe as principal decreases. In theory each monthly installment is the same over the period of the loan in regards to ratio of interest to principal. So for them to turn around and say sliding scale when in reality it isn't seems like a screw over job. I'd ask them to see their amortization table on the payments .

We did ask for an amortization table and they told us to go to hel_l. It was either take it or leave it. It's quite easy to calculate over the first year with a simple interest formula. I'll be doing some more calculations and see what the actual difference is.

[stingray]

The big problem is, that the insurance companies never pey the full value of the car. It's mosthly cover the restamount with the finance company, but actually only about 80% of the carvalue. In most case they will take of the outstanding amount from the finance, but you'll end up with almost nothing. For example if a new Vios (550'k) get stolen in the first year, the insurance pay maybe 400 to 420'000 Baht. But you paid 550 for that car. So there is your loss.

[robblok]

The big problem is, that the insurance companies never pey the full value of the car. It's mosthly cover the restamount with the finance company, but actually only about 80% of the carvalue. In most case they will take of the outstanding amount from the finance, but you'll end up with almost nothing. For example if a new Vios (550'k) get stolen in the first year, the insurance pay maybe 400 to 420'000 Baht. But you paid 550 for that car. So there is your loss.

Of course you don't get new value of the car, they should give you the value of a 1 year old vios not of a new one else it would be profitable to let your car get stolen.

[MoonRiverOasis]

I have paid out finance on 4 different cars in Thailand, all early by at least 2 years, and I've never been ripped off on the 50% discount on the remaining interest. All different financiers too: Sicco, Toyota Leasing, Thanachart and Ayudhya.

Are you sure it's not a case of an early payout 'fine' distorting the numbers? Some of our financiers warned that paying out the loans before 1 year / 2 years of payments had been made would result in an early payout fee.

Are you willing to share the numbers for a quick double check?

[basjke]

The big problem is, that the insurance companies never pey the full value of the car. It's mosthly cover the restamount with the finance company, but actually only about 80% of the carvalue. In most case they will take of the outstanding amount from the finance, but you'll end up with almost nothing. For example if a new Vios (550'k) get stolen in the first year, the insurance pay maybe 400 to 420'000 Baht. But you paid 550 for that car. So there is your loss.

Of course you don't get new value of the car, they should give you the value of a 1 year old vios not of a new one else it would be profitable to let your car get stolen.

What Stingray wants to say is that your 550.000 Baht vios is only insured for a total value of 420.000 Baht.If you drive out of the dealership and some moron crashes your car to a total loss you lose 20% of what you paid in just 1 day.

Edited June 22, 2010 by basjke

[MoonRiverOasis]

The insured value of your car can be negotiated no problem, and you can raise it mid-contract with an additional fee, or set the value when renewing. I have done this for every car I've owned to insure the value of accessories and the real replacement value of the vehicle was all covered.

[frtiz]

The insurance isn't the problem here, it's the finance company that's doing the creative thinking.

The insurance, Viriya, paid up 430K on the car, which was unfortunately 10 days into the second year. We insured the car for an extra amount in the first year so we would get 85%. In the second year the retained value was 74%. That was just tough luck for us and cost us another 70K baht . However, when you do all the calculations there is still a gap of about 10K which they say is the result of a sliding scale calculation rather than the static interest rate that is used by the dealerships. However, what I don't understand is that there is not a separate clause for paying up a loan after car theft. They just treat you like you WANT to pay out the finance. This is where I got pissed off. You're just getting scr##wed twice.

Nissan Leasing has bluntly admitted that what we have been told by their agents during the sale was not the same as the company is telling us now. They had no problem in admitting that mostly it's done for simplicity's sake and trying to talk the customer into buying a car.

Anyways there is no way that we're going to get anything more out of it. And the only thing we can do is advice people against doing any business with them. Although it's only a 10K baht difference, it's another 10K on top of the 70K we missed out on because we were in the 2nd year of the insurance and all the things that were stolen from the house at the same time.

Calculation:

new value: 589,000

Financed value: 426,000

Insured value 430,000 in the second year (this is also what the insurance paid)

Annual Interest rate 2.89% over 4 years.

Annual interest as calculated by Nissan leasing on purchase: 4 years at 12,311 baht = 49,244 baht

Amount of installments paid: 12 months =

Amount of interest paid 12,311 baht

Amount of value paid 106,500 baht

Remaining interest to be paid by us: 36,933

Remaining finance to be paid by us: 319,500

50% discount on the remaining interest: 18,467 baht (50% of 36,933)

total amount to be paid by us 319,500 + 18,467 = 337,967

Total amount paid up by the insurance = 430,000

amount to be paid to us by the finance company: 92,033 baht

amount that Nissan leasing WANTS to pay us: 83,430 baht

Up until now, Nissan Leasing hasn't provided us with any insight in their calculations. They say it's too difficult and it's done by a computer. Go figure.

Edited June 23, 2010 by frtiz

[MoonRiverOasis]

The amount it's out appears to be almost exactly 1 month's repayment - are you sure your last repayment (the 12th one) has actually registered in their system? It's not unusual for it to take 3-7 days for an automatic payment to be credited against your loan account.

[robblok]

The big problem is, that the insurance companies never pey the full value of the car. It's mosthly cover the restamount with the finance company, but actually only about 80% of the carvalue. In most case they will take of the outstanding amount from the finance, but you'll end up with almost nothing. For example if a new Vios (550'k) get stolen in the first year, the insurance pay maybe 400 to 420'000 Baht. But you paid 550 for that car. So there is your loss.

Of course you don't get new value of the car, they should give you the value of a 1 year old vios not of a new one else it would be profitable to let your car get stolen.

What Stingray wants to say is that your 550.000 Baht vios is only insured for a total value of 420.000 Baht.If you drive out of the dealership and some moron crashes your car to a total loss you lose 20% of what you paid in just 1 day.

That would be real bad.. I thought he meant a 1 year old car would still get 550.000 back.. I would think you loose 20% in a year not a day. After the first year the devaluation slows down.

Ok never mind just read it is done differently

Edited June 23, 2010 by robblok

[harrry]

The same form of calculation is used in Australia by the finance companies. It is quite possible to get a payout and still be paying three years later.

[yabaaaa]

The big problem is, that the insurance companies never pey the full value of the car. It's mosthly cover the restamount with the finance company, but actually only about 80% of the carvalue. In most case they will take of the outstanding amount from the finance, but you'll end up with almost nothing. For example if a new Vios (550'k) get stolen in the first year, the insurance pay maybe 400 to 420'000 Baht. But you paid 550 for that car. So there is your loss.

Of course you don't get new value of the car, they should give you the value of a 1 year old vios not of a new one else it would be profitable to let your car get stolen.

In the UK you would get a new car in the first year, in the second year you would get market value only.

[robblok]

The big problem is, that the insurance companies never pey the full value of the car. It's mosthly cover the restamount with the finance company, but actually only about 80% of the carvalue. In most case they will take of the outstanding amount from the finance, but you'll end up with almost nothing. For example if a new Vios (550'k) get stolen in the first year, the insurance pay maybe 400 to 420'000 Baht. But you paid 550 for that car. So there is your loss.

Of course you don't get new value of the car, they should give you the value of a 1 year old vios not of a new one else it would be profitable to let your car get stolen.

In the UK you would get a new car in the first year, in the second year you would get market value only.

As i read it here you dont get market value but a fixed percentage. That kinda sucks im pretty sure the market value would be higher.

[MoonRiverOasis]

As i read it here you dont get market value but a fixed percentage. That kinda sucks im pretty sure the market value would be higher.

A misunderstanding

In Thailand your insurance premiums are always 'agreed value' (i.e. a fixed value in the contract), however if you do not specify the value you want, your insurance company will default it each year to 80% of the current market value (not new price).

[robblok]

As i read it here you dont get market value but a fixed percentage. That kinda sucks im pretty sure the market value would be higher.

A misunderstanding

In Thailand your insurance premiums are always 'agreed value' (i.e. a fixed value in the contract), however if you do not specify the value you want, your insurance company will default it each year to 80% of the current market value (not new price).

Good thing to know because im in the process of buying a car. I don't mind paying a bit more to make sure its better insured.

[craigt3365]

We specifically asked for coverage higher than 80% on our new car...the manager at the Honda dealer said no way. 80% was the max. Maybe that is with their insurance company only????

[jombom]

The 2.89% is just a way to mislead the public ---- a marketing ploy.

The real interest rate is closer to 5.5 or 6 per cent, if it is calculated properly.

Banks are practising the same misconceptions.

Probably time Thailand got real, and started protecting the public, with proper consumer legislation. Many countries insist on the APR being quoted on all Finance offers.

[craigt3365]

You are absolutely right. I was quoted 2.5% on my Honda paperwork. The banks says the same, and then says 4.75 Effective Rate (is that APR??). B.S. Same crap was done in the US until that law requiring APR to be listed.

I was all excited about getting 2.5%! Now, after reading this thread, need to research what penalties will be imposed if I pay off early!

[rgs2001uk]

We specifically asked for coverage higher than 80% on our new car...the manager at the Honda dealer said no way. 80% was the max. Maybe that is with their insurance company only????

Ignore the manager at Honda, probably trying to palm you off with the one year free insurance they offer, Thanachart is the insurance company.

Tell the manager to stick his insurance where the sun dont shine, you could do a lot worse than going to a large branch of Tesco/Lotus, they sell insurance from a range of companies. If you want more than 80% its available, but you will pay extra for it.

Another thing to look for is the policy allows your car to be repaired at the main dealers and not only at Somchais workshop.

[MoonRiverOasis]

The 2.89% is just a way to mislead the public ---- a marketing ploy.

The real interest rate is closer to 5.5 or 6 per cent, if it is calculated properly.

You are absolutely right. I was quoted 2.5% on my Honda paperwork. The banks says the same, and then says 4.75 Effective Rate (is that APR??). B.S. Same crap was done in the US until that law requiring APR to be listed.

People, it's flat rate interest. It's not by default a 'scam', nor a rip-off, nor misleading - in fact flat rate is the original easy-to-understand interest calculation method. APR was invented by banks, for the banks, so they could get the bulk of their interest repayments earlier in the loan term rather than having to wait for it. Nothing more, nothing less. Thailand's spin on this is to only give 50% discount on the remaining interest when paying out early. Do the math.. it's all pretty similar.

If you want to make comparsons, google will point you to any number of calculators that can compare flat rate to APR. The fact is, the MLR (min. loan rate) in Thailand is currently 5.85% and the the MRR (min. retail rate) is 6.45% so the 'flat rate' deals you're getting on car finance at 0.85% to the high 2%'s are still very good deals, no matter how you cut it.

Also, don't forget that the first rate you'll be offered by a salesman is always the worst. Negotiate it <deleted>

Edited June 24, 2010 by MoonRiverOasis

[frtiz]

The 2.89% is just a way to mislead the public ---- a marketing ploy.

The real interest rate is closer to 5.5 or 6 per cent, if it is calculated properly.

You are absolutely right. I was quoted 2.5% on my Honda paperwork. The banks says the same, and then says 4.75 Effective Rate (is that APR??). B.S. Same crap was done in the US until that law requiring APR to be listed.

People, it's flat rate interest. It's not by default a 'scam', nor a rip-off, nor misleading - in fact flat rate is the original easy-to-understand interest calculation method. APR was invented by banks, for the banks, so they could get the bulk of their interest repayments earlier in the loan term rather than having to wait for it. Nothing more, nothing less. Thailand's spin on this is to only give 50% discount on the remaining interest when paying out early. Do the math.. it's all pretty similar.

If you want to make comparsons, google will point you to any number of calculators that can compare flat rate to APR. The fact is, the MLR (min. loan rate) in Thailand is currently 5.85% and the the MRR (min. retail rate) is 6.45% so the 'flat rate' deals you're getting on car finance at 0.85% to the high 2%'s are still very good deals, no matter how you cut it.

Also, don't forget that the first rate you'll be offered by a salesman is always the worst. Negotiate it <deleted>

In a sense you're right. However, not everyone who's buying a car is aware of this nor capable of doing the math. I should have been able to do it but maybe I haven't looked in to it as much as I should have. Bottom line is that this thread will hopefully give buyers some more insight in how interest is calculated and what the pitfalls are.

Too bad my car got stolen as I was pretty OK with the interest rate and the amount of interest that we had to pay in case we didn't pay out early. I'm working really hard here as a uni lecturer and that's not on a western salary I can assure you, so the financial setback for me was pretty rough. Also, I really liked my previous car and it caused us a lot of sorrows and frustrations buying a new car and replacing all the stuff that was stolen. Try and get your Ma and Ba degrees reissued... It's impossible as EU universities are afraid of fraud with Ma degrees. In addition I lost all my research that I was doing at the moment and I missed out on a research grant because of that. They took my laptop, portable hdd and backups. I guess the lessons to learn are multifold. In the end, I'm happy they didn't kill me and that I'm still in good health although the gas they drugged me with left me with a bad headache for 4 days. I still get a headache if I think about everything. I guess I just have to find some middle way in restoring my sense of trust in Thais. It's not nice having 4 Jabaa maniacs in your house taking everything they please. Many thanks everyone for your contributions.

Maybe it's an idea to make a sticky topic on how interest calculations work here in Thailand.

Fritz

[MoonRiverOasis]

Wow, what an ordeal - I'm lost for words!

In a sense you're right. However, not everyone who's buying a car is aware of this nor capable of doing the math.

Most people with 5 years of schooling will have no problem calculating flat rate interest in their head, or worst, on a napkin, but I'd openly challenge 99% of the population to tell me how much they owe on APR finance at a given point within their loan term, without resorting to google or excel