Hopeton Morrison

Dear Mr. Morrison,

I read your article in the Sunday Gleaner which was very enlightening. However, I am kindly asking for your help.

I am 26 years old, single, earn approximately $29,000 monthly and want to buy a car. My bills amount to approximately $19,000 each month, inclusive of a Scotia Mint that I am currently a part of. I rarely buy clothes, as I wear uniforms to work. I rarely go out and basically, I don't have a social life.

With my budget, which financial institution would be most suitable for me so as not to be sleepless at nights? What kind of loan should I obtain? The car I was considering costs approximately $700,000, small, new and appears to be comfortable.

I would really appreciate any suggestions you may be able to offer Mr. Morrison. Thank you very much.

- T.S.

Dear TS,

Thanks for the compliments. Many financial institutions are now offering very attractive motor car loans. In recent times, Scotiabank, National Commercial Bank and RBTT have been advertising attractive motor vehicle loans at rates slightly over 18 per cent on the reducing balance. In addition, Capital & Credit Merchant Bank and several credit unions including COK, CWJ and GSB have also been advertising similarly attractive loans. So, there is no shortage of institutions available to you, all of which are offering more or less the same product.

In the case of a new vehicle, you can access a loan of up to 90-95 per cent financing routinely these days. That means that you will need to find an initial deposit of 5-10 per cent to access the loan. At 18.35 per cent, (the most attractive rate that I have seen advertised) for 7 years your monthly payment on $700,000 works out to be $14,856. Bear in mind, however, that you will be required to pay processing fees that generally work to about 1.5 -2 per cent of the total loan. Some institutions, however, waive the payment of these up front charges.

Based on your income of $29,000.00 and present debt load of $19,000.00 that leaves you with a balance available to spend of $10,000 which is about $5,000 less than the amount needed to meet your monthly car payments. In addition, you must think about gasolene and upkeep costs. How are you going to pay for those? You might want to consider purchasing a car that is a bit older and less costly or increase your earnings.