Brilliant finance offers from Ford and Mazda, any catch?

[Alestorm]

Hi Guys, I'm looking for a new car and I noticed both Ford and Mazda (makes sense as they work together and probably have the same finance house in SA) have crazily good finance offers only on two specific models:
The Mazda 2 sedan 1.5 Dynamic, and Ford Fiesta 1.6 Tdci Ambiente (Diesel).

Now these are probably their least desirable models so it might make sense, but still the offers are Ford 0.87% interest and Mazda 0.45%. This is a saving of at least R30 000 or so over most other finance offers, and basically interest free.

Take a look:
http://www.ford.co.za/buying/ford-credit-offers
http://www.mazda.co.za/servlet/Conte...YPage&site=MSA

Is their any catch to this sort of deal, because it's amazing value compared to the 11-13% interest I'd get from my bank buying second hand, which was my initial choice. I'm young and my first car I got at 13%, which literally costs you R58000 in interest over 60 months, compared to R6000 here.. a crazy saving.
I know there's a large residual, that doesn't bother me, it works to my advantage.
Will the interest rate really stay fixed (linked to prime of course)? Anything else to consider besides how cheap and efficient diesel is at the moment ?

[Fazda]

Just remember that the "Bank always wins" ~ in this case you have a hefty residual to sort out after 5 years, PLUS, as you said, these are their two least desirable models, so the chances of you getting a decent trade in after 5 years, or whenever you want to settle, are probably close to zero.

Be very careful ~ if it seems too good to be true, it probably is.

[Alestorm]

Just remember that the "Bank always wins" ~ in this case you have a hefty residual to sort out after 5 years, PLUS, as you said, these are their two least desirable models, so the chances of you getting a decent trade in after 5 years, or whenever you want to settle, are probably close to zero.

Be very careful ~ if it seems too good to be true, it probably is.

Hmm the thing is I have no problem with a residual, I far prefer to earn interest on money which I put away to pay this off in 5 years (I'll only be earning more, plus inflation, while this amount remains constant) rather than paying interest on it over the 5 years.
I'm not going to try and trade the car in for a ridiculously low price, I'll be selling it privately for what it's worth.

Well the car I far prefer here is the Fiesta 1.6 turbo diesel, it's of course also incredibly fuel efficient, saving me more. They are very sought after cars the new Fiesta, one of the best in their segment right now. I don't think it will have a particularly bad resale value at all.

Well if there's nothing besides the normal pitfalls of bank finance, then you're really winning here.. no where else would you get close to 0.8% interest on a car.

[Hemi300c]

After paying your payments, your last payment is 40% of purchase price, you'll either have to re-finance (not easy) or hope the value of the car covers 40% of original price - stay away from balloon payments IMO.

[Dryad]

Just to point out something, this deal is a lease deal and not a instalment sale. I would recommend you read up about the difference between the 2 and then look at the deal again. Any bank website under car finance should have a detailed definition for you. Ford credit in South Africa is ABSA.

[Chevron]

Just remember that the "Bank always wins" ~ in this case you have a hefty residual to sort out after 5 years, PLUS, as you said, these are their two least desirable models, so the chances of you getting a decent trade in after 5 years, or whenever you want to settle, are probably close to zero.

Be very careful ~ if it seems too good to be true, it probably is.

+1

I would never get the low end model in a range anyway. If those cars are at your limits of affordability rather get a Kio Rio 1.4Tec.

[Fazda]

I'm pretty sure that a lease deal means that you won't be given the chance of buying it at the end of the period - just check on that - I could easily be wrong.

[Alestorm]

+1

I would never get the low end model in a range anyway. If those cars are at your limits of affordability rather get a Kio Rio 1.4Tec.

See, the Kia Rio 1.4 Tec has no finance offer close to this, so I would pay an extra R55 000 or so in interest just to finance it, with the same balloon payment. I can't afford the Rio Tec while I can afford a Fiesta with this deal, which I wouldn't normally be able to. You see why that is what makes this a good deal..
I would be able to get the R140 000 base Rio at about the same price as getting the R198 000 Fiesta or Mazda on this deal, that's the point! The difference is R50 000 in interest. Now why pay just for interest instead of a better/more expensive car for resale.

Funny thing is these also aren't the low end models, they're actually the higher end models in terms of price, just the options most people probably wouldn't go for (Mazda2 sedan and Fiesta Diesel).

So I don't see the catch yet

[Alestorm]

I'm pretty sure that a lease deal means that you won't be given the chance of buying it at the end of the period - just check on that - I could easily be wrong.

Afaik you do get the option.. but I'm not 100% on how it works either, as in why you wouldn't definitely get to buy it. But I assume if you have the balloon amount you can pay it and own.

Also, this isn't specific to these deals, all the Ford and Mazda Credit offers are "lease" agreements, so I don't think it's anything sinister. Anybody have a better idea?

[Chevron]

See, the Kia Rio 1.4 Tec has no finance offer close to this, so I would pay an extra R55 000 or so in interest just to finance it, with the same balloon payment. I can't afford the Rio Tec while I can afford a Fiesta with this deal, which I wouldn't normally be able to. You see why that is what makes this a good deal..
I would be able to get the R140 000 base Rio at about the same price as getting the R198 000 Fiesta or Mazda on this deal, that's the point! The difference is R50 000 in interest. Now why pay just for interest instead of a better/more expensive car for resale.

Funny thing is these also aren't the low end models, they're actually the higher end models in terms of price, just the options most people probably wouldn't go for (Mazda2 sedan and Fiesta Diesel).

So I don't see the catch yet

Ambiente is the entry level Fiesta. I wouldn't get lower than a Trend.

The catch is that it's a lease agreement. not installment sale. You might not own the car at the end of the deal.

From your post though it sounds like you are trying to buy beyond your means. What happens when it comes to services, tyres and maintenance?

Don't screw yourself over. Look at a top end Ford Figo if you have to. Those cars may look boring, but are packed with features.

[McSack]

@OP

You'll notice you are paying the full retail price for the vehicles - no discount applicable on these deals. The manufacturers subsidize the interest rate with the max discount they would normally have given on the car.

You still pay interest on the residual amount over the full period of the lease. You would be expected to pay this full amount in cash or re-finance at the end of the lease, failing which you do not get ownership of the vehicle.
Be prepared to be married to the car for the full period (and possibly longer) because break even for trade-in is going to be very close to the "maturation date" of the lease with that big balloon payment lurking around at the end ... especially with the less popular models

[Alestorm]

Ambiente is the entry level Fiesta. I wouldn't get lower than a Trend.

The catch is that it's a lease agreement. not installment sale. You might not own the car at the end of the deal.

From your post though it sounds like you are trying to buy beyond your means. What happens when it comes to services, tyres and maintenance?

Don't screw yourself over. Look at a top end Ford Figo if you have to. Those cars may look boring, but are packed with features.

Hmm I'll look into the Lease more carefully, but again all the Ford and Mazda finance offers are on Lease, not just these offers, but only they have near zero interest rates. From Ford:

The Lease Agreement allows you uninterrupted use of the vehicle with the following options at the end of the term:
- You may acquire ownership of the asset by purchasing it for an agreed amount in terms of the lease agreement.
- Nominate a third party to purchase the asset for an agreed amount in terms of the lease agreement.
- Continue to use the asset for a reduced rental, or for no rental, in terms of the existing lease agreement or under a new finance agreement.

So, the Trend Figo is around R130 000, with no special finance deal so I pay about R50 000 in interest financing. This is almost the same price as getting a Fiesta on this deal. Then I have a car worth far less for resale, it might be worse financially, never mind getting a worse car.
I'm not bothered by the Ambiente, none of the Trend features are critical for me. It's the actual car that's important. In any case the Mazda here is the second highest spec level, two up from base, I may go with that instead of a diesel.

This isn't far beyond my means though, they both have service plans and warranty's for 4 years, but I could afford maintenance easily. I just wouldn't usually spend this much on a car. Here it looks like it makes sense to pay no interest and get a better car.

[Alestorm]

@OP

You'll notice you are paying the full retail price for the vehicles - no discount applicable on these deals. The manufacturers subsidize the interest rate with the max discount they would normally have given on the car.

You still pay interest on the residual amount over the full period of the lease. You would be expected to pay this full amount in cash or re-finance at the end of the lease, failing which you do not get ownership of the vehicle.
Be prepared to be married to the car for the full period (and possibly longer) because break even for trade-in is going to be very close to the "maturation date" of the lease with that big balloon payment lurking around at the end ... especially with the less popular models

Thanks McSack, I thought this is the case. They are offering the models that are overpriced already. But.. getting a Fiesta Diesel for the equivalent price of +-R150 000 (the Mazda is actually R148000 from R198 000, they advertised it like this for the finance deal in the past) is then still a great deal. If that was the cash price then it's what I'd buy, and I really don't like the idea of buying a car on normal interest which is around 12% for me.
I'm not too bothered by the residual, I plan to put away say R800 a month from next year and earn interest on this (far more than the 0.8% they're charging me) to pay it off in 4 years time, this works to my advantage in terms of financing, no?

If instead I got a R140 000 Kia Rio (my ideal choice given my budget really, or something second hand) I'd end up paying about the same amount overall, including resale.

[flashsa]

Bottom line on Residual payments: If you sign up for one, expect to drive that car for the full finance period as trading the car in before that will be near impossible due to depreciation reducing the value of the vehicle faster than you pay it off.

[KOPITE]

What salary do you earn and what is your payments going to be. I would go for the Kia imho, but you can always buy my car which is for sale. look in classifieds.