Balloon payment, or not.... ?

Balloon payments make sense when your income is set to increase by far more than the average over the next five years. E.g. First job.
 
Garson007 said:
Balloon payments make sense when your income is set to increase by far more than the average over the next five years. E.g. First job.[/QUOTE

My income increase is 6% on 10000. (first job, starting jan)
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Nikita1 said:
My income increase is 6% on 10000. (first job, starting jan)
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That's pretty much inflation, so don't do it. If you're planning on trading a car in every x amount of years, then maybe look at leasing instead. While the lower installments due to a balloon may be attractive, there's far more potential to get yourself into some serious crap...
 
If you opt for the balloon option, you have to be disciplined to put money away to be able to pay it off when it comes down to it... that being said, I'd advise against it. It may be slightly more expensive up front, but you save more in the long run on interest repayments especially.

You could up owning substantially more than you will be able to get for the vehicle if you sold or traded it in in x years, which puts you in a worse off position than you would like to be... lease or rather not go for balloon option...
 
Why the need to swop cars every three years if you are just starting to work now?

What a way to piss money away for life.

What you should want to do is buy a car you can keep for ten years and then only buy a new one...especially because you are starting on low income.

The youth of today often astounds me...and saying that makes me feel old.
 
SauRoNZA said:
Why the need to swop cars every three years if you are just starting to work now?

What a way to piss money away for life.

What you should want to do is buy a car you can keep for ten years and then only buy a new one...especially because you are starting on low income.

The youth of today often astounds me...and saying that makes me feel old.
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To be fair, it's somewhat forced upon people due to the money making scheme called a maintenance plan, where they inflate maintenance costs out of plan. But yeah, a reliable and low maintenance car is the way to go when you're starting out...
 
Mike Hoxbig said:
To be fair, it's somewhat forced upon people due to the money making scheme called a maintenance plan, where they inflate maintenance costs out of plan. But yeah, a reliable and low maintenance car is the way to go when you're starting out...
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Yup maintenance plans and extended warranties are the biggest shams people seem to fall for as they have no real experience of what the actual maintenance on a car costs.

But it's not forced on anyone. If you keep taking your car to the same dealer who you know is ripping you off outside of maintenance plan then you can only blame yourself. There are many reputable third party mechanics that are dealership quality or better for 1/3 the price.

I still have my very first car (that I actually owned) sitting in the drive way and it's 14 years old and has done 160 000km without anything out of the ordinary. The most any service has ever cost was about R3500 when the cam belt was replaced and that was only very recently.

Still on original clutch and pretty much original everything.

I'm only considering to sell it now because it stands outside where it previously lived in the garage and because of that it's rusting a little bit and the paint is starting to age but more than anything it's being sold because of disuse and the battery running flat more often than not.

Needless to say the longer I've kept it the less it has cost me per day and this is the problem many people seem to miss by running after new cars. Your cost per day is always rising and never falling if you just keep paying for it.
 
SauRoNZA said:
Why the need to swop cars every three years if you are just starting to work now?

What a way to piss money away for life.

What you should want to do is buy a car you can keep for ten years and then only buy a new one...especially because you are starting on low income.

The youth of today often astounds me...and saying that makes me feel old.
Click to expand...

I am in my 30's, I have been working for over 10 years, this is the first job where I can afford to buy a new car.
I think the option of trading your car in every 3 years or so, and settling the amount, and buying a brand new car, is a nice option to have, if you can afford the R3000 or so repayments every month.
 
Nikita1 said:
I think the option of trading your car in every 3 years or so, and settling the amount, and buying a brand new car, is a nice option to have, if you can afford the R3000 or so repayments every month.
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That's just silly IMHO. I would rather invest that R3000 towards my retirement instead of a depreciating asset.

Maybe it's just me being silly though, I don't want to work my whole life.
 
Nikita1 said:
I am in my 30's, I have been working for over 10 years, this is the first job where I can afford to buy a new car.
I think the option of trading your car in every 3 years or so, and settling the amount, and buying a brand new car, is a nice option to have, if you can afford the R3000 or so repayments every month.
Click to expand...

Watching poor life choices 101 over here.
 
Nikita1 said:
I am in my 30's, I have been working for over 10 years, this is the first job where I can afford to buy a new car.
I think the option of trading your car in every 3 years or so, and settling the amount, and buying a brand new car, is a nice option to have, if you can afford the R3000 or so repayments every month.
Click to expand...


You should go do the math of what a car costing you R3000 per month (plus inflation) will cost you in the end. You are effectively losing R3000 per month that could've gained you interest over 20 years.

That somebody has to explain this to you (and others) especially considering your age and financial position is alarming.

Buy a cheaper and reliable car, pay it off, save for retirement and invest in experiences (seeing the pyramids, bathing in the Maldives, skeeing in Switzerland etc) rather than investing in a car you'll be tired off in three months anyway.
 
Hamster said:
You should go do the math of what a car costing you R3000 per month (plus inflation) will cost you in the end. You are effectively losing R3000 per month that could've gained you interest over 20 years.

That somebody has to explain this to you (and others) especially considering your age and financial position is alarming.

Buy a cheaper and reliable car, pay it off, save for retirement and invest in experiences (seeing the pyramids, bathing in the Maldives, skeeing in Switzerland etc) rather than investing in a car you'll be tired off in three months anyway.
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No-one has to explain the obvious to me, I am just considering the 2 main options:

a) do I want to pay a car off after 5 years, and have that same car for many years to come...
b) trade-in a car after 3 years, and have a NEW car every few years (considering I can afford the R3000 repayment, and I do save towards my retirement, and I have already travelled all over.)

It's not my fault teachers are paid so poorly in this country, and that this is my current financial situation (after having obtained a degree.....but anyway).
 
Nikita1 said:
No-one has to explain the obvious to me, I am just considering the 2 main options:

a) do I want to pay a car off after 5 years, and have that same car for many years to come...
b) trade-in a car after 3 years, and have a NEW car every few years (considering I can afford the R3000 repayment, and I do save towards my retirement, and I have already travelled all over.)

It's not my fault teachers are paid so poorly in this country, and that this is my current financial situation (after having obtained a degree.....but anyway).
Click to expand...


Ok well in that case skip the balloon payment.
 
Nikita1 said:
No-one has to explain the obvious to me, I am just considering the 2 main options:

a) do I want to pay a car off after 5 years, and have that same car for many years to come...
b) trade-in a car after 3 years, and have a NEW car every few years (considering I can afford the R3000 repayment, and I do save towards my retirement, and I have already travelled all over.)

It's not my fault teachers are paid so poorly in this country, and that this is my current financial situation (after having obtained a degree.....but anyway).
Click to expand...
Why do you have to have a new car every few years though, if your current one is reliable?

Invest that 3k a month in an ETF or something, and draw out of it for maintenance - which should be about twice a year assuming normal services and wear and tear, say around 5k a year. That means that you're actually making about 29k extra a year + interest, that you otherwise would have been pissing away in an endless cycle of car repayments. I'm sure there are a lot of nice things that you could do with that money...
 
Nikita1 said:
It's not my fault teachers are paid so poorly in this country, and that this is my current financial situation (after having obtained a degree.....but anyway).
Click to expand...

In the future your financial situation will be your fault though.

And pissing away R3k a month "just because I can" is just silly.
 
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