Buying A House Or Car With Financing?

[thaigene2]

I must admit that when Bangkok Bank announced (quietly) that it was willing to loan money to foreigners to buy condos I was interested in finding out more. Now a couple of months later - and a few online and telephone enquries later - still no further ahead (read 'no response').

So..a little frustrated, I've started to lose interest again - and came across this little nugget that's been on this site for a couple of years anyway..it makes the case (mathematically) why it's not wise to buy property/condos in Thailand anyway, and why it is actually cheaper and more logical to rent.

http://www.thaivisa.com/condominium_thailand.0.html (it's a two-parter I think)

So with some money burning a hole in my pocket...the 'new car' bug then bit me - again. So looking at cars in showrooms of both Toyota and Honda (my preferance) piqued interest. "let's talk financing" I said to the saleswoman.

Anyway..she said okay 'let's talk guarantors'. "What?" I said. Yes..doesn't matter whether you're willing to pay 20% down, and are on 100,000 USD per year (which I'm not..) you still need a Thai guarantor..(doesn't matter whether buyer is Thai or foreigner apparently)

But even if you DID have a rich Thai to guarantee..here is how the interest rate works. It's usually 48 or 60 months..at only 2.75 % per annum. Good, isn't it? Well it would be if they'd lend you the cash for one year at 2.75, then recalculate what's owing with another 2.75 the next year, etc....but the trick here is that interest is calculated UP FRONT for the FULL FOUR or SIX YEARS.

So even in year-three you are still paying interest on money you paid back two years earlier..The forumula is (if financing 500,000 baht) like this: (500,000 X .0275) X 6 + 500,000 = 568,750 Baht. So that's 68,750 baht interest. More like double the rate I think (though maybe still not too bad with rates low).

Car repayments therefore are about 13,000 B per month. Since the average professional Thai salary is not much more than that, who's buying?? Must be all those guys with rich Thai Uncles willing to guarantee their loans I guess.

Anyone know if the Bangkok Bank mortgages work on the same rip-off interest calculation? I'd ask them but like I said..they don;t respond..probably think I'm a trouble maker - which of course I am

[solo siam]

Isn't that how all financing is done?

Professional Thai salary is far more than 13,000 baht per month.

50% down and you wont need a guarantor.

[Dragonman]

Isn't that how all financing is done? 

Professional Thai salary is far more than 13,000 baht per month.

50% down and you wont need a guarantor.

<{POST_SNAPBACK}>

Just quoted 40% down and no guarantor for new Mitsu.

Depends what you count as professional! My brother in law is sub- editor for large thai language newspaper in Bangkok. Salary 12,000 baht a month

[eljeque]

From : BBL_SG Housing Loan Dept <[email protected]>

Sent : Monday, September 19, 2005 10:58 AM

To :

CC : "Torpong Charungchareonvejj" <[email protected]>, "Rosalind Lee" <[email protected]>

This is the email address of Bangkok Bank in Singapore.

This bank "offers" loans to foreigners on properties in Thailand.

The loan is up to 70% of the purchase price.

The minimum loan is 100,000 Singapore dollars, which I find to be quite high as so many properties here are far less than that.

The cost of the loan is 5,000 Singapore dollars!!!!

----------

FINANCING FREEEHOLD LANDED PROPERTY (Land & Villa)

TERMS FOR FINANCING OF RESIDENTIAL PROPERTY IN THAILAND

Purpose

To finance the purchase of freehold landed property in Thailand.

Loan Quantum- Up to 70% of the purchase price

Maximum loan amount - S$1,000,000 or equivalent amount

Minimum loan amount - S$100,000 or equivalent amount

Note : Drawdown quantum shall be the lowest of

a) amount as per approved limit

Up to 70% of purchase price of property, when converted at our exchange rate prevailing upon drawdown

c) 90 % of the appraised value upon completion by our appointed valuer

Security : (1) Legal mortgage of property to be financed

(2) Pledge of Borrower’s shares (is borrower is a corporation)

(3) Personal Guarantee

Loan Tenure : Max 10 years

Currency : The loan shall be denominated in SGD, USD or any other currency acceptable to the bank

Interest Rate (Subject to changes at Bank’s discretion)

Loan in SGD – Bangkok Bank’s Prime Lending Rate per annum(currently 6% )

Loan in USD – US Prime + 0.5% per annum(currently 6.5%+0.5=7.00%)

Loan in other currency – To be advised

Repayment : Repayment of principal and interest is by monthly instalment and to commence one month

from date of disbursement of loan.

Drawdown

Loan shall be drawdown only upon payment by the borrower of the difference between the purchase price and the loan amount, subject to completion of loan documents and fulfillment of the conditions precedent.

Prepayment

Prepayment of loan allowed subject to payment of 1.5% flat on the loan amount to be prepaid.

Processing Fee

Processing fee of S$5,000 or equivalent amount is payable upon acceptance of our letter of offer and S$2,000 or equivalent amount shall be refunded upon drawdown of the loan.

Expenses

All expense such as legal/mortgage costs , valuation fee and fire insurance premium etc shall be payable by borrower.

Documents Required

i) Completed Mortgage Loan Application Form

ii) Copy of identification card(front and back)/passport

iii) Signed copy of Sales & Purchase Agreement

iv) Employer’s letter addressed to Bangkok Bank Public Co Ltd (Singapore) confirming position, years of service and remuneration

v) Bank’s Reference letter addressed to Bangkok Bank Public Co Ltd(Singapore) confirming banking relationship, conduct/type of account and size of loan/deposit with the bank.

vi) Last 6 months bank statements

vii) Last 2 years’ Income Tax Return

viii) Last 2 years’ Balance Sheet & Profit & Loss Statements (For self-employed borrower)

ix) Credit Bureau Report from country of residence

x) Others upon request

Note : Approval of loan subject to evaluation of applicant’s financials standing and repayment ability

Ref : 150805

For enquiries : [email protected] Tel : 65-6410 0400

--------------------------------------------------------

[jef]

Isn't that how all financing is done? 

<{POST_SNAPBACK}>

Most certainly not, but too complicated for Thai banks and less of a scam

I Was offered financing for Toyota Vigo without thai garantor, but with thieves interest rates it's cheaper to pay cash.

[steveromagnino]

Isn't that how all financing is done? 

<{POST_SNAPBACK}>

Most certainly not, but too complicated for Thai banks and less of a scam

I Was offered financing for Toyota Vigo without thai garantor, but with thieves interest rates it's cheaper to pay cash.

<{POST_SNAPBACK}>

Like all things, it depends who you speak to and how you handle the conversation. Result for me is no guarantor for car or apartment financing and borrowing 60 months for the car and 60 months for the apartment on about 20% deposit on the car, and 50% deposit on the apartment. Think the rates are 2.5% on the car (calculated as per the method below, which is effective rate of 6.something) and 5.9% on the apartment fixed 3 years with first year at 1/2 that. Then MLR + something for the last 2 years. However, since I make 10%+ on the sharemarket, I'd rather take the cash for that. All about opportunity cost....

For financing, there are ALL manner of financing arrangements; the way quoted here is certainly not unique to Thailand; the key is to understand what the interest is calculated on and any fees and so on.

There are approx 300,000 Thai households in Bangkok with household income of 70,000b or more per month; average of 3.1 occupants per household means that this is about 1m people out of the 12m odd Bangkokians with access to a household income of 70,000b or more. NESDB stats. Average household income of Bangkok is supposedly around 40,000b per month according to BKK Post 2 years ago (questionable how they calculated that and methodology not shown), but combined we start to see a picture that BKK people are not really that poor.

I can assure you that MANY professionals are earning considerably more than 13,000b a month; we cannot even get quality graduates to work for that amount. BTW a journalist or editor (or a teacher for that matter) is technically not a professional are they? Professionals = doctor, lawyer, accountant, architect, engineer, etc etc.

In my business, we say we are selling to a first world group of consumers, most of whom run businesses and make money using a third world cost base. That's why you see a watch business here which is keeping several Swiss companies very rich; someone is buying these 100,000+ baht watches and they are mostly locals.

Regarding security, bear in mind that the risk of default is considerably higher with someone who has the ability to up and leave whenever they want. Banks are aware of this, and besides which banks in Thailand are fairly slow to react to things encouraging them to take on risk. That said there are several threads about how i and others have got mortgages from local banks; check it out yo' befo yo' reck yo'self and it might give you ideas how.

[Gary A]

I have been car shopping and here are the numbers I was given:

850,000 sticker price. 60,000 discount, 316,000 down payment. The balance is 474,000. Honda dealer financing at 2.65 percent and payments of 10,883 per month for 48 months.

That makes the cheap sounding interest pretty expensive.

[Darkling]

Isn't that how all financing is done? 

Professional Thai salary is far more than 13,000 baht per month.

50% down and you wont need a guarantor.

<{POST_SNAPBACK}>

Is that correct ben? As i am thinking of renewing my pickup early next year.

[Plus]

With the inflation rising to 6-7%, fixed interest payments rate is not that bad. If you have cash it's of course better than financing but saving cash in the bank for the future purchase doesn't seem like a wise idea - money depreciates very fast these days.

[Heng]

I'm not a fan of any kind of financing (except for when I'm on the receiving end of the interest payments of course), but car financing really is the worst. Doesn't matter how fast you pay it off, the total interest is the same. Land/houses and things of the real estate mortgage nature, you can pay it down as fast as you want and you save all that interest. At most you get hit with that 2% early bird penalty but that's nothing compared to what some folks pay in interest after 15+ years.

[Plus]

I've been paying for my cars and driving in great comfort for the past four years. If not for finance I'd have spent all these years standing for hours a day on public buses. No brainer, really. Worth every satang.

[lopburi3]

I've been paying for my cars and driving in great comfort for the past four years. If not for finance I'd have spent all these years standing for hours a day on public buses. No brainer, really. Worth every satang.

<{POST_SNAPBACK}>

If you can afford car payments you obviously could afford to take better transport than a bus so if you live in a city like Bangkok I would look very carefully at the relative advantages in respect to taxi service or combo taxi/mass transport. Most Thai seem to swing to car ownership but I suspect this has more to do with face than economics.

[Plus]

I was commenting on cash vs financing.

I suppose I could afford taxis anywhere I went but when I got a car I moved to a big house in suburbs where taxis are by phone only, and long taxi rides cost an arm and a leg.

And you can't compare your own private car and a taxi.

[TokyoT]

Is there a law or regulation in Thailand that prevents 3rd party companies from offering decent loans with more consumer friendly interest structures for the purchase of a car?

Seems like a very good potential market for someone like GE finance or even Citibank, or any company looking to for a good way to penetrate the car financing market place.

[steveromagnino]

Is there a law or regulation in Thailand that prevents 3rd party companies from offering decent loans with more consumer friendly interest structures for the purchase of a car? 

Seems like a very good potential market for someone like GE finance or even Citibank, or any company looking to for a good way to penetrate the car financing market place.

<{POST_SNAPBACK}>

Well since GE Capital is Easycash and there are several finance companies doing this, I'd say it is actually in place.

The cost of the money at the moment based on the 5 year bond rate is not as cheap as you might think; somewhere in excess of 5% AFAIK and the inflation rate is running at 5%+ at the moment thanks to the diesel subsidy.

So where a finance company would get the money cheap enough to be able to lend out to an inherently risky proposition like a car is unclear. At the moment I know you can get a car lease at 5.5% interest rate which is IMHO an absolute bargain with interest rates on home loans I'd guess ending up 7%+ within the next 12 months.

The point of ultra low deposit rates; well that is due to banks carrying NPLs plus they have excess liquidity anyway; but at some point soon their excess liquidity will be used up and they are going to have to offer more competitive deposit rates you would think.

Any borrowing less than about 5% is an absolute bargain, and as a former banker, cars are not a great asset to lend against. So I'd say that the interest rates for vehicles is not so bad at the moment.

[thedude]

i think the point made by another poster was that since the car loan interest is not charged on a reducing balance, the effective rate is far above the published rate, probably in the double digits. if you add that to the annual depreciation of your car, your effective cost of ownership goes way up.

i was working out a scheme offered by bmw the other day. a car worth 2.8 million would cost me 3.2 million over 48 months, including interest. in 48 months, i'd be lucky to sell the car for 1.8 million, so my effective cost of ownership is 1.4 million, or 350,000 baht per year. the cost/capital equation is never going to stack up, no matter how you cut it. but on the bright side, you do accumulate some asset value, so your next car assuming you trade in the first, is going to have a lower cost of ownership.

bottom line, car ownership in thailand is something that will never make sense by the numbers but that can only be justified perhaps by the more intangible value placed on lifestyle.

[funfun]

I must admit that when Bangkok Bank announced (quietly) that it was willing to loan money to foreigners to buy condos I was interested in finding out more. Now a couple of months later - and a few online and telephone enquries later - still no further ahead (read 'no response').

So..a little frustrated, I've started to lose interest again - and came across this little nugget that's been on this site for a couple of years anyway..it makes the case (mathematically) why it's not wise to buy property/condos in Thailand anyway, and why it is actually cheaper and more logical to rent.

http://www.thaivisa.com/condominium_thailand.0.html (it's a two-parter I think)

So with some money burning a hole in my pocket...the 'new car' bug then bit me - again. So looking at cars in showrooms of both Toyota and Honda (my preferance) piqued interest. "let's talk financing" I said to the saleswoman.

Anyway..she said okay 'let's talk guarantors'. "What?" I said. Yes..doesn't matter whether you're willing to pay 20% down, and are on 100,000 USD per year (which I'm not..) you still need a Thai guarantor..(doesn't matter whether buyer is Thai or foreigner apparently)

But even if you DID have a rich Thai to guarantee..here is how the interest rate works. It's usually 48 or 60 months..at only 2.75 % per annum. Good, isn't it? Well it would be if they'd lend you the cash for one year at 2.75, then recalculate what's owing with another 2.75 the next year, etc....but the trick here is that interest is calculated UP FRONT for the FULL FOUR or SIX YEARS.

So even in year-three you are still paying interest on money you paid back two years earlier..The forumula is (if financing 500,000 baht) like this: (500,000 X .0275) X 6 + 500,000 = 568,750 Baht. So that's 68,750 baht interest. More like double the rate I think (though maybe still not too bad with rates low).

Car repayments therefore are about 13,000 B per month. Since the average professional Thai salary is not much more than that, who's buying?? Must be all those guys with rich Thai Uncles willing to guarantee their loans I guess.

Anyone know if the Bangkok Bank mortgages work on the same rip-off interest calculation? I'd ask them but like I said..they don;t respond..probably think I'm a trouble maker - which of course I am 

<{POST_SNAPBACK}>

well i read your thing but it wasnt what i was interested in knowing but now i read it im glad i did.

i was hoping if i bieng english and only here for 6 weeks up tp press can own a car or bike.

im told by a tai guy if i buy a scooter i must buy it in a tai name and sure enough hel_l lend me his any one know if any truth in this?

[expatinasia]

thaigene and others,

Where are you knuckleheads from? Your ignorance about how and why interest is calculated the way it is indicates that you couldn't possible be from the US.

Until the early 60's, all financing, with the exception of mortagages, was done with "add-on interest". After the murder of a less than honest car dealer, relating to the interest he was charging his customers, the federal government developed "regulation Z" also known as "the rule of 78's" - an incredibly difficult method to calculate the "true" interest rate.

[เพลง]

thaigene and others,

Where are you knuckleheads from?  Your ignorance about how and why interest is calculated the way it is indicates that you couldn't possible be from the US.

Until the early 60's, all financing, with the exception of mortagages, was done with "add-on interest".  After the murder of a less than honest car dealer, relating to the interest he was charging his customers, the federal government developed "regulation Z" also known as "the rule of 78's" - an incredibly difficult method to calculate the "true" interest rate.

<{POST_SNAPBACK}>

Am I right in presuming that you seriously belive that all finance is calculates the "US" way? If not then I'm not entirley sure of the point of your little murder story?

[funfun]

thaigene and others,

Where are you knuckleheads from?  Your ignorance about how and why interest is calculated the way it is indicates that you couldn't possible be from the US.

Until the early 60's, all financing, with the exception of mortagages, was done with "add-on interest".  After the murder of a less than honest car dealer, relating to the interest he was charging his customers, the federal government developed "regulation Z" also known as "the rule of 78's" - an incredibly difficult method to calculate the "true" interest rate.

<{POST_SNAPBACK}>

[funfun]

thaigene and others,

Where are you knuckleheads from?  Your ignorance about how and why interest is calculated the way it is indicates that you couldn't possible be from the US.

Until the early 60's, all financing, with the exception of mortagages, was done with "add-on interest".  After the murder of a less than honest car dealer, relating to the interest he was charging his customers, the federal government developed "regulation Z" also known as "the rule of 78's" - an incredibly difficult method to calculate the "true" interest rate.

<{POST_SNAPBACK}>