THIS IS HOW THE FINANCE OPTION WORKS,AND FOR IT TO BE BETTER UNDERSTOOD, WE WILL USE A CASE SCENARIO FOR IT TO BE EASIER UNDERSTOOD.

SCENARIO

If one wishes to purchase a car of N3,000,000 , how much will be the first installmental payment and how much will the subsequent monthly payment be ?


Firstly there are some key factors which have to be known to you.
The interest rates charged by banks vary according to income. That means that the higher your income the lower the rates
The standard rates charged vary from 22%-24%
You are required to take out a comprehensive insurance policy at the point of initial payment.
the premium charged per annum is 5% of the value of the vehicle
You must have at least a 6 month active account
Registration & licensing is also a pre-requisit



VALUE OF CAR N3,000,000.00

10% INITIAL PAYMENT 10% OF N3,000,000.00 = N300,000.00

REMAINING BALANCE N3,000,000.00 - N300,000.00 = N2,700,000.00

BANK INTEREST (using 22% in dis case) 22% OF N2,700,000.00 =N 594,000.00

TOTAL AMOUNT PAYABLE (interest+balance) N2,700,000.00 + N594,000.00 = N3,294,000.00

AMOUNT PAYABLE MONTHLY (5 years in dis case) N3,294,000.00 DIVIDED BY 60 MONTHS =N54,900.

INSURANCE(5% of value) 5% OF N3,000,000.00 = N 150,000.00





PAYMENT SCHEDULE


10% INITIAL PAYMENT N300,000.00
5% INSURANCE N150,000.00
REGISTRATION & LICENSING N 35,000.00
___________
TOTAL INITIAL PAYMENT N 485,000.00



SUBSEQUENT MONTHLY PAYMENT (for 60 months) N54,900.00

@autodyne

This appears as voodoo Finance/economics. You assumed a finance term of 5 years, yet your interest calculation is for 1 year without compounding. Giving TVM (Time Value of Money) concept, the bank/financier will  be loosing a lot of money on this deal and NO bank/financier on this planet will do this deal the way you have calculated it. Something is wrong somewhere, somehow. Please explain this your calculation further.