early settlement fees not transparent

[fadzli88]

Hello bros,

 

Need some feedback regarding this issue i got from my bike shop. I wanna clear my installment outstandings, which left 21months @ $324/month. So total is $6804. Then was told there will be early settlement fees included. So the staff check with the finance department and will get back to me. Straight away they tell me its $1300 for the fees. I want them to explain base on wat figures they charge me with this amount. They can only say the finance say to pay this amount. They are not being transparent to me about this. I dun even allowed to speak to the finance. Now i already paid a total of $8104. The invoice they wrote is just early settlement. No break down. Is this justifyable? Any advise??

[z3rokill]

Hi bro early settlement is normally a fixed percentage of your loan amount.. i believe it shud be explicitly stated in the contractual aggreement you signed when you took out the bike. This is true for bike production.

[fadzli88]

U mentioned about the fixed percentage. This is clarifying. The shop dun even mentioned anything. Keep saying the finance says so. But when i told them i wanna speak to the finance, they said the finance dun want to see customers -_-

[haoKR]

i dont think you are new to the world of the many black shops in sg ya..are u

thats how they earn, some charge a flat fee of $350.

[fadzli88]

Am not new. But first time having to settled this way. $1300 reasonable?

[ellamcoy]

What if you juz duly fulfill the monthly payment? Does it mean that you can avoid the +$1300 by continuing the current repayment plan?

[wait4me]

wow u paid 1300 for early payment settle ??

 

these bike shops have whatever term they like to call , early settlement fee .

 

if you settle your car loans, u instead pay lesser if u settle early but not bike

[No.10]

I early settled with them years ago and till now, not given the red key to the bike. Definitely not the shop to do business with.

Sent from my RM-892_apac_sea_280 using Tapatalk

[zalk]

The reason they charge you early settlement fee is because the longer u take the loan, the higher the chance of you not being able to pay it back because of financial difficulty etc then they can repossess and sell it again and make money. So when u pay back early they have no chance of you being not able to pay back on time see? With that said though $1.3k is a lot. Can buy another bike with that money.

[Orleng]

The reason they charge you early settlement fee is because the longer u take the loan, the higher the chance of you not being able to pay it back because of financial difficulty etc then they can repossess and sell it again and make money. So when u pay back early they have no chance of you being not able to pay back on time see? With that said though $1.3k is a lot. Can buy another bike with that money.

 

QFT

 

Usually other sort of loans, by settling early, the financial institute will have more liquid funds to utilise elsewhere hence sometimes you end up paying lesser than if you carried on with your repayment schedule.

 

However for bikes, it seems like it sort of represents the opportunity cost lost when you repay early. The opportunity of repo-ing your bike should you maintain the same repayment schedule and missing out or falling behind on your repayments. The otherwise "lost" chance of charging late fee, towing (for repo) fee, storage fee.

[theblackmamba]

1300 can buy what bike?

[z3rokill]

U mentioned about the fixed percentage. This is clarifying. The shop dun even mentioned anything. Keep saying the finance says so. But when i told them i wanna speak to the finance, they said the finance dun want to see customers -_-

Hi bro, anyway you can get hold of the contract that you signed? A copy shud be with you right? If its not stated anywhere in the contract regarding early settlement fees, you might have a case.

 

Small claims tribunal is an option at the subordinate court. But my feeling is, they definitely have it stated in their contract to avoid lawsuit, just that we normally dont realize the clause until we need them.

[fadzli88]

can buy bike-cycle .

 

any bros thanx for all the feedbacks. was quite upset about this issue. some of my friends mentioned $700 for early settlement is already alot. $1300 is more ridiculous.

[TrolleyCart]

The reason they charge you early settlement fee is because the longer u take the loan, the higher the chance of you not being able to pay it back because of financial difficulty etc then they can repossess and sell it again and make money. So when u pay back early they have no chance of you being not able to pay back on time see? With that said though $1.3k is a lot. Can buy another bike with that money.

 

QFT

 

Usually other sort of loans, by settling early, the financial institute will have more liquid funds to utilise elsewhere hence sometimes you end up paying lesser than if you carried on with your repayment schedule.

 

However for bikes, it seems like it sort of represents the opportunity cost lost when you repay early. The opportunity of repo-ing your bike should you maintain the same repayment schedule and missing out or falling behind on your repayments. The otherwise "lost" chance of charging late fee, towing (for repo) fee, storage fee.

 

The 2 chaps above have provided a very good and concise summary on why an early settlement fee exist. Hope this serves as a good info to all new riders.

[fadzli88]

Yah so bikers now all of us aware of this GLOBAL MOTORS. Confirm plus guarentee u will have to bear the early settlement fees if required and not forgetting their secret way of dealings with the calculations.

[zalk]

1300 can buy what bike?

 

1-2 yr COE left cub kia. It's still a tangible object for your money though, instead of using the money to pay interest.

[MR BIKER]

Maybe should calculate properly how much you lose exactly if you pay until instalment is over. it feels like eternity but i feel we lose out more by paying lumpsum the 1300 fees plus (304 x 21months). its a hassle to keep going to the shop every month especially having to see those straight face sellers. If i were you , upon hearing what 1300 for ERP (according to ASPhoon), i would say no thank you. i will deligently pay up until instalment over

[nsr1980]

those damm bloody leasing finance company!!!

[fadzli88]

hahah relax bro!

[ST_Nepal]

That's why AS Phoon has written clearly that there is no Early payment fee.

 

 

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[nsr1980]

bloody suckers finance leasing companies!

[ellamcoy]

Had gotten a bike from AS Poon previously. The manager mentioned no early settlement fees to another potential buyer.

Was then wondering what it meant, now I see the frustrating implication.

 

Does anyone know which other retailers does not charge early settlement fees? Please share.

 

Early thanks!

[PaLmEr]

Wrong Section. Moving thread.

 

PaLmEr

Forum Moderator

SingaporeBikes.Com

[FB666Y]

Bike shops have been coming up innovative ways to make riders part with their money. This “Early Settlement Fee” is one of them.

In 2000 there wasn’t such a thing – in fact, when I paid off my bike back then with almost two years of installment left I INSISTED AND RECEIVED AN INTEREST REBATE.

 

In 2009 when I bought a bike, this loophole was effectively closed when along with the Hire Purchase Act which I had to sign, the bike shop insert an “Early Settlement Fee” agreement that I had to sign. Most buyers are too eager and probably thinking about their new rides to give much thought to the stack of papers the shops get you to sign. Little do they know that they have signed off most of their consumer rights, and given the bike shops pretty much free rein to penalize the buyer.

 

Months later when the want to early settle or sell off the bike independently the bike shops will gleefully rub their hands. Out comes the “Early Settlement Fee” or refinancing when you sell off the bike (more about refinancing further down).

 

A lot of people think the shops is financing the bike but that’s not really true – most loans the buyer takes are financed and fulfilled by financial institutions or banks. Bike shops make MORE money by charging you a HIGHER interest than what the bank or financial institution is charging them. Take a look at how cars are financed – both 1st hand and 2nd hand. The interest bike shops charge are ludicrous when you compare.

 

Taking how car loans are financed, take a look at how they deal with the early settlement issue – its called “Rule of 78”:

http://info.maybank2u.com.sg/personal/loans/faq/faq-loan-car.aspx

http://www.sgcarmart.com/news/writeup.php?AID=61

 

Taking a simple bike loan of:

$10,000 for 2 years at 8% (well it’s a 2nd hand bike):

 

Loan amount = $10,000

Interest rate = 8% per annum

Total interest to be paid = (8% x 3 years x $10,000) = $2,400

Period of finance = 36 months or 3 years

Monthly instalment = ($10,000 + $2,400) /36 = $344.44

Number of instalments paid = 10 months

Total amount already paid for = $344.44 x 10 = $3,444.44

Interest rebate according to "Rule of 78" = [26(26+1)] / [36(36+1)] x $2,400 = $1,264.87

 

Here, 26 represent the number of months remaining of the loan that is unpaid, and 36 is the original number of months of the bank loan.

The amount of $1,264.87 is the interest rebate on the 26 months' interest from early termination of the loan.

 

20% of interest rebate as penalty = 0.2 x $1,264.87 = $252.98

Loan redemption amount = $10,000 + $2,400 - $3,444.44 - $1,264.87 + $252.98 =$7,943.67

What you pay total = $3,444.44 + $7,943.67 = $11,388.11

 

 

What the bike shops actually do:

$10,000 (Loan) + $2,400 (Interest) + $1,000 (Early Settlement) = $13,400

 

I’m using $1,000 as guide – for TS it was and eye-watering $1,300.

 

If TS paid $1,300 as Early Settlement there is a very good chance he signed that document that allowed the shop to penalize him.

 

The problem is that we ALLOW the shops to take advantage of us. We don’t have a riders’ association or union that looks out for us.

When we start taking more personal and financial responsibility we can pressure the relevant parties, like the Singapore Motor Traders Association to do more for consumers/riders/buyers.

[FireGunz]

Bike shops have been coming up innovative ways to make riders part with their money. This “Early Settlement Fee” is one of them.

In 2000 there wasn’t such a thing – in fact, when I paid off my bike back then with almost two years of installment left I INSISTED AND RECEIVED AN INTEREST REBATE.

 

In 2009 when I bought a bike, this loophole was effectively closed when along with the Hire Purchase Act which I had to sign, the bike shop insert an “Early Settlement Fee” agreement that I had to sign. Most buyers are too eager and probably thinking about their new rides to give much thought to the stack of papers the shops get you to sign. Little do they know that they have signed off most of their consumer rights, and given the bike shops pretty much free rein to penalize the buyer.

 

Months later when the want to early settle or sell off the bike independently the bike shops will gleefully rub their hands. Out comes the “Early Settlement Fee” or refinancing when you sell off the bike (more about refinancing further down).

 

A lot of people think the shops is financing the bike but that’s not really true – most loans the buyer takes are financed and fulfilled by financial institutions or banks. Bike shops make MORE money by charging you a HIGHER interest than what the bank or financial institution is charging them. Take a look at how cars are financed – both 1st hand and 2nd hand. The interest bike shops charge are ludicrous when you compare.

 

Taking how car loans are financed, take a look at how they deal with the early settlement issue – its called “Rule of 78”:

http://info.maybank2u.com.sg/personal/loans/faq/faq-loan-car.aspx

http://www.sgcarmart.com/news/writeup.php?AID=61

 

Taking a simple bike loan of:

$10,000 for 2 years at 8% (well it’s a 2nd hand bike):

 

Loan amount = $10,000

Interest rate = 8% per annum

Total interest to be paid = (8% x 3 years x $10,000) = $2,400

Period of finance = 36 months or 3 years

Monthly instalment = ($10,000 + $2,400) /36 = $344.44

Number of instalments paid = 10 months

Total amount already paid for = $344.44 x 10 = $3,444.44

Interest rebate according to "Rule of 78" = [26(26+1)] / [36(36+1)] x $2,400 = $1,264.87

 

Here, 26 represent the number of months remaining of the loan that is unpaid, and 36 is the original number of months of the bank loan.

The amount of $1,264.87 is the interest rebate on the 26 months' interest from early termination of the loan.

 

20% of interest rebate as penalty = 0.2 x $1,264.87 = $252.98

Loan redemption amount = $10,000 + $2,400 - $3,444.44 - $1,264.87 + $252.98 =$7,943.67

What you pay total = $3,444.44 + $7,943.67 = $11,388.11

 

 

What the bike shops actually do:

$10,000 (Loan) + $2,400 (Interest) + $1,000 (Early Settlement) = $13,400

 

I’m using $1,000 as guide – for TS it was and eye-watering $1,300.

 

If TS paid $1,300 as Early Settlement there is a very good chance he signed that document that allowed the shop to penalize him.

 

The problem is that we ALLOW the shops to take advantage of us. We don’t have a riders’ association or union that looks out for us.

When we start taking more personal and financial responsibility we can pressure the relevant parties, like the Singapore Motor Traders Association to do more for consumers/riders/buyers.

 

Wow... thankyou for the info.

 

So will be [26(26+1)] / [36(36+1)] which mean that [26*27] / [36*37] to get 702 / 1332 then follow by X $2,400 = $1,264.87

Am I right?

As not very sure about the "Rule of 78" .

Edited August 17, 2014 by FireGunz