Car Loan Calculator Philippines - Car Loan Monthly Repayment Planner

Aside from straight cash payments, purchasing a car through financing, or an auto loan, is one of the more prevalent ways we can buy a car. However, it's not as easy as it seems to qualify for one. Know more about how car financing works so that you can increase your chances of driving home your brand-new car.

• Intro – Getting a Car Loan
• Choosing the Right Car
• 3 Things to Determine Before Getting a New Car
• Getting a New Car (Pros & Cons)
• Car Loan Explained
• Car Loan Factors (Amount Loaned, Down Payment, Interest Rate, Terms of Payment)
• Basic Types of Car Loans
• Bank Car Loan vs. In-House Financing (Pros and Cons)
• Basic Car Loan Procedures
• Basic Car Loan Requirements

Getting a Car Loan?

Did you know that most people have a vague idea of what they can actually afford when it comes to getting a new or used car? This is because some think about the basic cash price, while others think only of the monthly payment. There's more to buying a vehicle than the initial cost, even if you pay cash. There are insurance, fuel costs, and maintenance, to name a few. Almost any new vehicle will ultimately mean higher insurance rates. Maintenance on a used car, even if it’s just three years old, may be required depending on how the previous owner took care of it. Setting out to buy a car with just a rough monthly payment estimate   (whether leasing or straight financing) is a surefire way to pay more than you might.

Before you even consider acquiring your dream car, start by determining your budget. Go over your cash flow and look at your household expenses, your cash, and your take-home pay. From there, you can determine how much you can reasonably afford to pay for a new car. Need a general rule of thumb? You should probably cut back if you devote more than 15 to 20 percent of your household income to transportation.

So just how much should you spend on a new car? According to financial experts, no more than 20 percent of monthly income. And that should include payments on all the cars you may own, whether you have one vehicle or six. And we're talking about your take-home pay, not your gross income. By and large, cars are terrible investments because they depreciate in value the moment they roll out of the dealership lot. It's like taking your money to a Casino. Chances are, that amount of money will get smaller and smaller because cars annually go down in value.

Choosing the right car

Always consider your lifestyle and your family's needs before you choose a car. This is based on the fact that there isn’t a “right” car for everyone, but there is a “best” one that should meet all your needs. Maintenance is also a factor many people don't consider. Naturally, more expensive cars also cost more to maintain but are more durable in the long run. As such, here are several key questions you should ask yourself first to help you make the right choice.

1. Who is it for, and who’s driving it?

Is it for you? Your son/daughter? If so, then you should consider passenger safety as well as the size of the vehicle.

2. How old are the passengers?

If the primary passengers are toddlers or small children, then a minivan would suit your needs best, as its sliding doors would make it much easier to position toddlers in their car seats. Young and elderly passengers can also get in and out quickly.

3. What's the primary use?

If you're buying a car for commuting, gas mileage and comfort will be significant considerations. Sit in a car before you buy and compare it with other models in its class.

4. City or Provincial car?

If the vehicle is mainly used around the city, then an aptly sized sedan would do its job perfectly as opposed to having a large SUV in the cramped Metro streets that won’t see rough terrain.5. How much horsepower do you need?

While some may argue that it’s not always enough, consider the car's primary purpose along with its horsepower rating in relation to its weight. Remember that too much can overpower the whole vehicle.

6. Is fuel economy important?

If this is a significant concern to you, then a subcompact or a mini compact-sized vehicle may very well be the answer to get better fuel mileage.

7. Is space important, and do you haul equipment?

If this is the case, consider a pickup truck or a full-size SUV capable of accommodating large and bulky equipment with matching horsepower to carry it. 

8. How long will you own it? Is it just a temporary service or a commuter car that you would probably consider selling once the loan has been paid off? Or are you thinking of long-term ownership? If you’re going for long-term ownership, you might want to opt for more quality despite the higher price.

Three things to determine before getting a new car

Doing your research before ever setting foot in a car dealership can save you thousands. You may be tempted to get started at the car dealership if you're in the market for a new car. But before you start scoping out new models, it pays to do some research on your computer. Here are three things you should know before you start shopping for a new car:

1. How much should the car cost?

Pricing information is readily available both online and through established publications. You can find out the base price of a car and how much various features add to that price, including special package deals.

2. How much can you afford to spend?

Most people decide how much they can afford when shopping for a new car based on the size of the monthly payments. Ultimately, you need to figure out which car you can afford based on those monthly payments. You might be better off having higher payments for a shorter term rather than stretching out repayment for more than five years.

3. Your financing options.

Do your research before you go to the dealership. Financing is another way for dealers to make money; some might add hidden costs to the deal. Armed with knowledge about how much a car should cost and how much you can spend, you can figure out, for example, whether you would save more money by financing it in-house or through an independent lending institution.

New-Car Pros & Cons

Pros

• It comes with a comprehensive car manufacturer's warranty that usually lasts up to three years or 100,000 km.
• It will likely have the latest safety, comfort, and convenience features.
• There are no surprises. You are the first owner, and there are no doubts about previous mechanical problems or accidents.

Cons

• It will cost significantly more than a three-year-old used car.
• Comprehensive and theft insurance costs are significantly higher than a used three-year-old car.
• It will instantly lose 25 to 40 percent of its value the moment you buy it, likely locking you into long-term ownership.

Car loans explained

A car loan allows a car buyer the means to purchase a vehicle and pay the bank or financial institution on a monthly basis over a fixed term. Depending on the total value of the car, the down payment, and terms of payment, it also entails paying a fixed interest rate for the duration of the car loan. This is for the benefit of the bank or financial institution as profit for availing the loan. Automatically, the car also serves as the collateral for the loan. If you default on your repayments, the lender can repossess the vehicle. Like a mortgage, the lender retains ownership of the vehicle until the final payment is made. Car loans can also apply to vans, trucks, and other types of vehicles for private or business purposes. To become eligible for a car loan here in the Philippines, one must be,

• At least 25 years old at the time of application
• A Filipino or Foreign citizen
• For Employed: Working for at least three years and with current employer for at least six months
• For Business Purposes: Should be in operation for at least three years

Car loan factors

The amount loaned, down payment, interest rate, and payment terms are basic car loan factors that ultimately determine the agreement between the borrower/car buyer and the lender/bank.

Amount loaned

This is the needed amount the car buyer must borrow from the bank or financial institution. This is determined by subtracting the car buyer's down payment from the vehicle's price from the car dealership.

Down payment

This is the initial amount that the car buyer has agreed to pay to start the car loan process. Depending on the bank or financial institution, the average down payment is at least 20% to 30% of the vehicle's Suggested Retail Price or SRP.

Interest rate

This is the amount a bank or financial institution charges on every loan, expressed as a percentage of the principal amount borrowed. The interest rate is typically calculated as an annual percentage rate (APR). An interest rate dictates the actual amount you pay over your loan term, so the higher the rate, the more you pay. In the Philippines, all auto loan interest rates come as a fixed rate.

Terms of payment

Most car loans are fixed at 36, 48, 60, or 72 months. And just like a personal loan, the shorter the term, the higher the monthly repayment, and vice versa. A less-than-average credit history is not necessarily between you and your car loan (unlike a personal loan). Aside from indicating the length of the contract, it also includes registration, insurance, policies, payment, repossession, and so on.

To calculate just how much your monthly payments will be, factor in the proposed purchase price, the down payment, the interest rate, and the term of your loan. These will affect the kind of car you can get for your money.  Remember, the more down payment you provide, the higher the vehicle price you can afford, but only as far as your monthly payment is concerned. You'll still be spending more money than you should for an asset that constantly decreases in value.

Some questions to ask yourself before availing of a car loan:

• How much can you afford as a down payment?
• How much can you afford in monthly payments?
• How much should you spend on the total price?

Basic types of car loans

The most popular type of car loan is the one offered by banks and the in-house financing scheme from car dealers. Almost all car dealers today have their preferred financing schemes and banks. While both methods have the same goal, they have slight differences regarding how they grant a car loan. So it’s best to explore both options before deciding on either one.

Bank Car Loan

• Competitive rates
• Add-on Perks for the payment schemes
• Preferred Clients get Pre-Approved 

Cons

• Lots of documentation and paperwork
• May require a hefty down payment
• May take time to process

In-House Financing

Pros

• Direct transaction with the dealer
• Low down payment options
• Quicker approval time
• Value add-ons for the car

Cons

• Higher interest rates
• Longer payment terms

Basic car loan procedures

Once you have decided on a particular type of car loan, the bank or financing institution will require you to submit personal records such as Income Tax Returns (ITR), a certificate of employment, and credit statements.  And for self-employed individuals, pertinent papers such as business registration papers, financial statements, trade references, etc.

This is a standard practice among all financial institutions for them to evaluate your financial capabilities to repay the loan. Take note of how much you are willing to spend against how much you will pay.  To get a safe ballpark figure as to how much you will be paying for that new car, get the sum of the Down Payment, Loan payment, Interest, and Insurance, or simply:

DP + L + I + Insurance = Estimate

Before you sign the bank contract, take time to read all the fine print that’s specified in it to avoid any misunderstanding and hidden costs that you are not aware of. In addition, each bank has its preferred dealer partner that comes with enticing incentives for anyone who avails of their auto loans. So look around for the car that suits you and your family’s needs and the bank that offers the most accessible payment plans and has the most customer incentives for you to get the best deal in town.

Basic car loan requirements:

Employed

• Filled out and signed application form
• Proof of Identity (Any Government-Issued ID’s passport, SSS ID, PRC ID, or driver’s license)
• Permanently employed for at least one year
• Certificate of Employment or ITR
• Pay slips for at least three months.
• Latest Proof of Billing (under borrower’s name)
• Latest Income Tax Return (ITR) / BIR Form 2316 (duly stamped by BIR)

Self Employed

• Filled out and signed application form
• Proof of Identity (Any Government-Issued ID’s passport, SSS ID, PRC ID, or driver’s license)
• Business must have been operating for the past two years
• Certificate of Business Registration Papers
• DTI (sole proprietorship) or SEC (partnership/corporation)
• Latest Audited Financial Statement
• Statement of Assets and Liabilities
• Statement of Income and Expenses.
• Articles of Incorporation (for corporations)
• List of Trade References (including addresses and telephone numbers)
• Bank Statement or photocopy of Passbook for the last three months.
• Proof of Other Income (Certificate of Deposits, Stocks/Bond Certificates, Lease Contracts, etc.)
• Latest Proof of Billing (under borrower’s name)
• Latest Income Tax Return (ITR) / BIR Form 2316 (duly stamped by BIR)

Overseas Filipino Worker (OFW)

• Filled out and signed application form
• Proof of Identity (Any Government-Issued ID’s passport, SSS ID, PRC ID, or driver’s license)
• OFWs must have a 1st-degree relative residing in the Philippines as co-maker
• Latest Crew Contract (for seafarer/seaman)
• Latest Employment Contract duly authenticated by Philippine Consulate (for OFWs)
• Proof of Remittance (allotment slips) for at least three months.
• Latest Proof of Billing (under borrower’s name)
• Latest Income Tax Return (ITR) / BIR Form 2316 (duly stamped by BIR)

With all these details, we hope you can make a more informed decision on whether you will purchase a car via financing or save up a bit more to buy one outright in cash. Either way, paying for a car is a milestone in a Filipino's life, and we should make our decisions knowing how they will impact our lives.