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-   -   The KTM Duke 390 Ownership Experience Thread (https://www.team-bhp.com/forum/motorbikes/138082-ktm-duke-390-ownership-experience-thread-11.html)

These EMIs are all in the 22-24% ROI (rate-of-interest) range!

Calculate it yourself here https://www.sbi.co.in/user.htm?actio...=0&id=0,17,389

That's a heavy number to pay as interest looking at the price tag. God damn, it seriously is a huge % of interest.

Ok after this mornings mail I wrote to them requesting other finance schemes with a 1 lac down payment. Here is what they sent:

BFL Finance Scheme

Down Payment : Rs. 1,01,300/-

EMI : Rs.10,038*12 months (ROI 9.50% p.a)

EMI : Rs 7,065*18 months (ROI 10.40% p.a)

EMI : Rs.5,591*24 months (ROI 10.99% p.a)

These are in the range 25-26% ROI!

Check for yourself

204,950 (Cost) - 100,000 (down payment) = 104,950/- (debt)

Now got to https://www.sbi.co.in/user.htm?actio...=0&id=0,17,389 and fill in "Amount" as 104,950, "Duration" as 12 months, and fill in a rate of interest so that it matches the value 10,038/- pm given by the finance company for the 12 month loan. In this case the ROI is 26.25%. The finance co says it is 9.50%! You are being taken for a ride (and not on the Duke 390!)

Hmm, not necessarily... It depends on the basis of the calculation. Traditionally loans for various product categories are quoted at a flat rate or APR in US or average rate. The other basis is the Effective Rate which you have calculated. This is more apt for comparison and relevant for consumers. Never go by flat rate as that is typically double the effective rate. Its a different question why they are allowed to quote flat rates in the first place. Probably to mask the high effective rates, which in turn is needed to cover the far higher rates of default in 2 wheeler loans...

But here is the rub, I have come across home loan rates quoted at 6% flat to entice gullible ppl. Now that is sheer robbery..

How does the calculation work with the flat rate? Even if we take the total interest paid 15,506/- (= 12*10,038 -104,950) on the 104,950/- loan for one year and simply divide it, we get 15,506/104950 X100 = 14.77 % (This is assuming that the loan is paid in whole at the end of the year, rather than being paid monthly over the whole year). How can the rate be quoted as 9.50%? There seems to be some financial skullduggery here!:uncontrol

You are absolutely right!! These figures translate to ~15% and not 9.5%. At first, I didnt bother to verify the figures because I disregard flat rate quotations straight off. And because I am not looking for a loan. But the numbers dont add up.

My advice is you are on the right track. Compare across loan schemes purely on the basis of the effective rate as you have done using the EMI figures and ignore the advertised rates (flat or their own custom definition in this case)

Any Loan instrument' interest rate is calculated with compounded interest and not simple interest. The banks always mis-interpret or communicate to the customer in SI and not in CI.

Lets take an example.

A and B both took a loan of 1 lac for one year, Person A took a loan on 7.90% Simple Interest and person B took loan on 14% compound interest.

Here is how their pattern or repayment will look like.

A will pay interest of Rs 658.33 each month i.e. 7900 for 12 months and after 12 months he would return or pay back 1 lac principal back to the lender, This means each month A is only paying interest and principal amount of 1 lac would be paid by A at the end of 12 months.

B on the other hand pays an EMI of 9000, and a portion of that EMI goes towards principal payment, So B pays about 1.08 lacs in 12 months, however at the end of 12 months he need not pay any principal since the principal was deducted out of the EMI. Effectively he also paid an interest same as "A" did, however it is a matter of how the interest rates were projected to each of these guys. Meaning SI or 7.90% equals to 14% CI, however banks always project the ROI in terms of SI and not CI.

Banks calculate with CI of 14% in mind and then re-calculate it with SI and project it to the customer, so a CI of 14% is essentially projected as 7.90% SI.

All interest rates quoted in the financial sector are CI Rates only.

This is wrong on the bank' part to not clearly mention the rate of interest @ compounded rates, and are projected in SI just to lure a customer.

I heard from a neighbor that there is some plan to make RTO charges a flat rate (6%) across India. Some time in Jan 2014.

What you have not included is the document and processing charges. The Downpayment includes these charges, approximately 4800 on a calculation which is the % of loan amount.

Get the loan amount details which in this case would be not just a difference of total amount of bike - initial payment. Get the loan amount details and apply the interest % on the loan amount.

It should be 9.5%.

You pay more for the processing charges which is 3% of loan amount + some thing.

Doing a reverse calculation:-

10038 PM * 12 Months = 120456
Loan amount should be aroun 110000
Initial amount = 100000
Bike cost is 204000

So basically you have paid around 6K for Processing fee etc. The interest on loan amount is 9.5 only.

You can now negotiate on the processing fees. Unfortunately there is no competition on giving loans and you will end up paying this extra amount.

This is my calculation which should be forgiven if its wrong.

Okay, here is the correct calculation :):

Loan 104,950 for 12 months
total paid =12*10,038= 120,456/-
total extra paid= 120,456-104,950= 15,006/-
Total interest at ROI at 9.5% =5479/- (check https://www.sbi.co.in/user.htm?actio...=0&id=0,17,389 )

So, "Processing fee" =15,006-5,479/-= 9527/-

So the interest is 5,479/- and the "processing fee" is 9,527/- !!!!

Repeating this calculation for the 24 month loan, we get a "processing fee" of 16,800/-!!! (against a total interest of 12,434/- at 10.99%)

Sorry if this is off-topic, but I am just killing time waiting for ebono's D200 vs D390 comparison !:D

Anyways, anyone coming in late to this thread over the last 3 pages would need to be excused if he mistakenly felt he happened upon a banking/accounting forum rather than a biking one. Its like school once again! :)

Had a small snippet on the 390 on the Overdrive show on CNBC, what really caught my attention was that the 390 is bang in CBR250 territory as far as price goes, not that is saying something! 100cc more with accompanied boost to performance for the price of a 250, that is one thing that KTM got right, Customers would have forgiven them even if this one was priced at 2.5 lakhs, but this pricing has made things very complicated for the customer, its going to be very difficult to choose a premium motorcycle

I have read that the test bikes for the KTM Duke are likely to be received at the showrooms in a few days and that deliveries can be scheduled only after that. While that is certainly a good practice,I was wondering whether it is mandated that a vehicle must be available for a test drive before that brand can be sold.

Display bikes are arriving I believe. To have the bikes test driven, new models should be registered with state/city RTAs. I am told that in AP the process will take 15 days. I could be wrong but that is the process is what I am told.