How to Calculate your Car Loan installment? (Excel)

Car Loan Installment Calculator – Excel (download)

Literally everyone I know has a car in Dubai ! Many of them bought the cars for the sake of convenience. Buying car is an exciting moment for the whole family.

I asked few of them as to how much did it cost? And I found out that an average family saloon car in  Dubai can cost anything between 30000 Dirhams to 120000 Dirhams! That’s a lot of money. Many of them prefer the tried and tested brands such as Toyota, Nissan, Honda; and they are right! These are the companies that produce good quality vehicles.

Few Startling Facts

I also came to know a startling fact from these same friends!!

Around 95% of them had a bank loan tied to their cars!! Meaning, they did not actually own the car by paying cash upfront; but had purchased a loan against the cars. Cool!

I went on to ask a further question: “What is the interest rate / profit rate?”

I saw blank faces! 60% of them did not exactly know what the interest rate was!!

Well, my queries did not stop at that point! I asked them another question…..”Is the interest rate quoted, Reducing Balance or Flat interest rate?”

This was a bouncer!

Most of them did not know what Reducing Balance or a Flat rate of interest was. And some of them were BANKERS!!

I thought, when bankers themselves did not know what this was, I was not surprised about lay men!

What is a Reducing Balance Interest Rate?

Under reducing balance interest rate, the interest is charged on the reduced principal outstanding each month after you pay the monthly installment. Meaning, if your total principal outstanding is 50000 Dirhams and you have paid 3000 as monthly installment, the interest for the coming month’s installment is charged on 47000 (50000 minus 3000).

What is a Flat Interest rate?

Under Flat interest rate, the interest is charged on the entire loan amount and then this amount is divided by your number of installments.

Banks in UAE – How do they treat Interest Rate on Car Loans?

When it comes to Car loans in UAE, most of the banks quote the interest rate in Flat Rate. Car Loan or Auto Loan is a lucrative business for Banks and Finance companies in UAE. Hence, there is a huge and cut-throat competition among banks.

How to calculate your Car Loan installment?

Below Excel has installment calculator, which will help you with calculation of your car loan installment.

Precautions you must take before making a decision for a Car Loan

1. Make sure that you know and read the terms and conditions of the loan agreement
2. Ask the bank what is the interest rate they are charging- Reducing Balance interest rate or Flat Interest rate
3. Get everything in writing!
4. Ask HUNDRED times for the best rate!!
5. Shop around with many banks and finance companies rather than a single bank.

Hope this Car loan installment helps you in making better decisions.

To download the Calculator in Excel format, visit this post or Download here.