CLICK TO CALCULATE

CLICK TO CALCULATE

CLICK TO CALCULATE

This tool calculates the monthly payment, effective interest rate, total interest and loan amortisation schedule for a fixed interest rate loan.

# Explanation of Fields

## Interest

Interest is a fee, for the privilege of using borrowed money. If you borrow money, it comes at a cost. That cost is interest.

Similarly, you can make investments that pay interest. Your reward for making the investment is the interest you’ll earn.

The interest is usually expressed as an interest rate.

## Interest Rate

An interest rate is a percentage of the borrowed money that the borrower has to pay as interest to the lender, over a period of time (usually a year). If the interest is not paid back to the lender at the end of the term, but instead added to the borrowed amount, the interest is compounded.

This means the interest payable at the end of the next term includes interest on the original amount borrowed, as well as interest on the previously accrued interest.

## Compound Interest

Compound interest is the interest payable on the original capital amount and any previously accrued interest.

For example, if you borrow R1000 from someone, at an interest rate of 10% per year, and interest is compounded on a yearly basis, then you will owe:

- R1100 = R1000 + (R1000 x 10%) after one year,
- R1210 = R1100 + (R1100 x 10%) after two years,
- R1331 = R1210 + (R1210 x 10%) after three years,
- R1464 = R1331 + (R1331 x 10%) after four years,
- R1610 = R1464 + (R1464 x 10%) after five years, and so on.

Compound interest can cause the amount of interest to escalate very rapidly. Einstein called the effect of compound interest the eighth wonder of the world.

## Nominal vs Effective Interest Rates

An important point to look at when making an investment or a loan, is the term over which interest is compounded. Banks often express interest rates as a nominal figure, but they compound interest on a daily basis.

The periodic interest rate is the percentage of interest charged at each compounding period. The periodic interest rate can be calculated by dividing the nominal interest rate by the number of compounding periods per year.

The nominal interest rate is the periodic interest rate, multiplied by the number of periods per year.

The effective interest rate is the total percentage of interest that accumulates on a loan, if interest is allowed to compound and no down-payments are made, for a year.

For almost all loans the effective interest rate will be more than the nominal interest rate.

For example: a loan with a nominal interest rate of 9%, where interest is compounded on a daily basis, has an effective interest rate of:

(100% + periodic_interest_rate)^compounds_per_year – 100%

= (100% + 9%/365)^365 – 100%

= 9.42%

This is because a little bit of interest is added to the borrowed amount, every day. The difference between nominal and effective interest rates can be significant. So make sure you read the fine print before you take out a loan, or make an investment.

## Loan Amount

The current outstanding amount on the loan, or in the case of a new loan, the total amount to be financed.

### Interest Rate

The nominal interest rate of the loan.

### Loan Term The length of the loan (in years).

### Payments

payment schedule, how regularly you will make payments.

### Interest Accrual

The compounding period (for most banks, this will be daily).

This tool will help you to calculate the real costs of owning and using a car over the next year. Complete the form with the values for the car you're interested in, and click on the calculate button.

If you're unsure of what values to fill in, an explanation of each field is given at the bottom of this page. You will also find a detailed explanation, and a few examples, in this article: What your car is really costing you.

# Overall Costs Summary

The table below contains a summary with the real costs for owning and using the car that you're interested in.

Monthly | Yearly | ||
---|---|---|---|

Ownership Cost | |||

Running Cost | |||

Total |

## Ownership Costs Summary

The table below contains a summary of the ownership costs for the car that you're interested in.

Monthly | Yearly | ||
---|---|---|---|

Depreciation | |||

Finance Cost | |||

Opportunity Cost | |||

Insurance | |||

Miscellaneous | |||

Total |

## Running Costs Summary

The table below contains a summary of the running costs for the car that you're interested in.

Monthly | Yearly | ||
---|---|---|---|

Fuel | |||

Maintenance | |||

Miscellaneous | |||

Total |

# Explanation of Fields

## Loan Interest Rate

The interest rate of the loan, with which the vehicle is, or will be, financed.

## Opportunity Rate

The interest rate of your next best investment. If you're not sure what to fill in here, fill in the interest rate of your home-loan, or if you don't have a home-loan, any other loan you have.

## Fuel Cost

The current cost for one liter of fuel.

## Present Value

The current value of the vehicle, right now, at this moment. A good way to determine the value of 2nd-hand vehicles, are by looking at advertisements in places like the auto-trader website.

## Future Value

The estimated value of the vehicle, 12 months from now. Once again, a good way to determine this value, is by looking at advertisements of 2nd-hand vehicles, that are one year older than the vehicle you are interested in.

## Here are some rough guidelines for the percentages by which most vehicles will depreciate per year:

New vehicles: 20% - 30%

Vehicles less than 5 years old: 15% - 20%

Vehicles more than 5 years old: 10% - 15%

## Loan Amount

The current outstanding amount on the vehicle loan, or in the case of a new vehicle, the amount that you plan to finance.

## Insurance Premium

The monthly insurance premium.

## Maintenance

The estimated amount that will be spent towards maintenance on the vehicle, in the next 12 months.

## Distance

The estimated amount of kilometers that will be traveled, per month.

## Fuel Economy

The estimated fuel economy of the vehicle, in kilometers per liter.

## Other Ownership Costs

Other miscellaneous costs, over the next 12 months, that you'll have just by owning the vehicle. E.g. vehicle registration, hiring of a garage for overnight parking, etc.

## Other Running Costs

Other miscellaneous costs, per month, that you'll have during the use of the vehicle. E.g. car wash, speed fines, parking fees, toll fees, etc.

This tool will calculate how much you need to save, the rate of return you need to earn on your investments, the age at which you will be able to retire and basically anything else you want to know about your retirement.

### Overall Summary

You need to save at least per month (increasing by % annually). *

You already have more than enough money invested for your retirement.

You can spend * of your invested money per month (increasing by % annually) and still retire at the age of .

You can retire when you are years old ( years from now).

Your retirement savings will last forever.

Your retirement savings will last until you are years old, which gives you years of retirement.

When you are retired, you will be able to spend per month (in today's Rand value). **

You need to earn an average return on your investments of at least % per year.

The average inflation rate may be no more than % per year.

Overall Summary | ||
---|---|---|

Item | Value | Notes |

Investment (Monthly) | Increasing by % per year. * | |

Investment (Yearly) | Increasing by % per year. * | |

Total Invested at Retirement | Investment needed at retirement. ** | |

Monthly Expenses | Monthly expenses while retired. ** | |

Years Until Retirement | Retire age () - current age (). | |

Years In Retirement | Life age () - retire age (). | |

Real Rate of Return | % | Rate of return after inflation. |

Rate of Return | % | Annual investment growth. |

Inflation Rate | % | Annual inflation rate. |

* This figure has to increase by % per annum to compensate for inflation.

** This figure is shown in today's Rand value. Because inflation is ignored, the actual figure is much larger. However, the value given represents the value of the figure in today's terms, so it is more meaningful.

Investment Summary | ||
---|---|---|

Item | Value | Notes |

Value at Age | Current investment value. | |

Value at Age (incl) | Value at retirement. | |

Value at Age (excl) | Value at retirement. ** | |

Invested by Age (excl) | Total amount invested. ** | |

Growth by Age (excl) | Investment growth. ** |

Detailed Investment Summary | |||||
---|---|---|---|---|---|

Age | Opening Balance | Growth | Invest / (Withdraw) | Closing Balance |

### Explanation of Fields

**Current Age**

Your current age.

**Retirement Age**

The age at which you plan to retire.

**Life Expectancy**

The age up to which you expect to live.

**Monthly Investment**

The amount of money you'll save towards your retirement every month, from now until the day you retire. This amount will increase by the inflation rate specified each year, so that the actual value saved remains the same.

**Monthly Expenses**

The amount of money you'll draw from your investments every month when you are retired, in today's terms (i.e. ignoring inflation).
Current Investments
The total amount of investments you've already made towards your retirement.

**Rate of Return**

The average expected nominal rate of return that your investments will deliver.

**Inflation Rate**

The average expected inflation rate over your lifetime.