Balloon Payment...what's the point exactly?

A

ALFAHOLIC

Expert Member
Joined
Jul 30, 2009
Messages
2,512
Reaction score
1
Hi ouens...

Ok, plans are in place to purchase/lease a new Giulietta 1.8 TBi QV...170kw bla bla bla...

It costs R330k

I'll put down 30 dep and trade for my car is 50k...so 80k forward.

Then at prime + 12 I'll most likely fix that rate...good idea or not?

Now...this works out to R5100pm excl insurance...I've made my budget available and said I'll go as high as R5500 for a car including insurance.

Then the finance guy calls me and tells me to take out residual...I can barely afford the car, but really want the car, coz of the service plan and maintenance plan and safety and 4 doors and turbo and many other reasons in my favour, oh and it uses less petrol than my current car...

So with 35% residual, which is maximum I think, it works out to R4350pm excl insurance. Now, for a performance car like this in G6 GTi teritory, I'll be 25 in Nov...and I'm signing the papers in Jan hopefully...that leaves a leeway of R1150 for insurance!

My worry is...

After 5 years...will the car still be worth R115000 residual?

Is it worth it to take residual or must I suck up and accept I can't afford it coz residual is not worth it?


Is there a way to calculate depreciation value of cars for future terms...i.e in year 4 of ownership, the car will be worth such and such?


Should I just buy a 3.2 GT and put a Dutch exhaust on and enjoy the sound...almost finish with motorplan and no service plan?

I really want the Giulietta!!

I've already planned how wifey and my daughter will fly with me to CT...we get picked up by someone from Gary Green...and I am the 1st to start my brand new car, well the bank's car but anyhoo..I've played this story over in my head contless times!!!

just worried about this residual crap, most say no, others say, if you plan on NOT keeping the car yes...makes monthly paymenths easier etc...
 
You really don't want to buy a car that you can just just afford, you never know what will happen in the future......

thats all advice I have
 
Prime + 12?
Thats a 22% interest rate? Is that correct or is it a typo? :S
Why would you want to fix that rate?
 
You expect to pay R400 insurance on a 330K car? A 100K car at your age will probably cost R800 or more.
 
Hi, sorry its a typo..supposed to be prime +2...No , that's my car payment budget...I'll have money left lol dont worry. I'm just not going to pay more than R5500...well, let me say it like this, wifey won't allow more than R5500pm on car!

yes, I guess I'm whipped.
 
R13... said:
You expect to pay R400 insurance on a 330K car? A 100K car at your age will probably cost R800 or more.
Click to expand...

Thus the finance guy suggested residual...thus the reason for the BABALOON thread...is it a good idea or not
 
What do you plan to do with the difference?
 
Given the value of the car, the insurance company WILL insist it gets fitted with an approved tracking device, so you also need to factor that into you costs. I bought my car just under 2 months ago, also in the same price bracket as you, all the insurers I called said the tracker was compulsory.

PS: Phone around for insurance. Standard Bank wanted to charge me R4500 for my car / month insurance - Budget worked out at around R800.
 
zamedic said:
Given the value of the car, the insurance company WILL insist it gets fitted with an approved tracking device, so you also need to factor that into you costs. I bought my car just under 2 months ago, also in the same price bracket as you, all the insurers I called said the tracker was compulsory.

PS: Phone around for insurance. Standard Bank wanted to charge me R4500 for my car / month insurance - Budget worked out at around R800.
Click to expand...

Shot dude will do so...actually will join the JHB Alfa club and get discount coz I belong to a club!!!
 
take R5500 and save it for 12 months.. if you can survive without accessing it once then you are ready to afford that kinda car.
balloon payment = an additional lump sum payment during your finance period.
residual = a payment at the end of your finance period.

Remember the finance guy and the car salesman aren't your mates, they are there to nail you as much as they can.
 
My bad - didn't read the post properly.

I was asking what you were going to do with the difference between the R5,100.00 and R4,350.00 - but I see it's for insurance.
 
BradDC said:
take R5500 and save it for 12 months.. if you can survive without accessing it once then you are ready to afford that kinda car.
balloon payment = an additional lump sum payment during your finance period.
residual = a payment at the end of your finance period.

Remember the finance guy and the car salesman aren't your mates, they are there to nail you as much as they can.
Click to expand...

I plan on selling the car after 5 years...i.e which will be hopefully MORE than R115k residual amount...
 
My thinking thus far is along these lines....

Get a car I GENERALLY Can't afford through residual/babaloon payment that somehow makes it more affordable.

After 5 years I plan to sell the car for more than the residual amount owed...

This to me...sounds like the best plan in the world...

Somehow I doubt its this easy?

Dolby you are PRO residual...help a brother out!
 
davemc said:
Tell them to guarantee the residual with a written buyback guarantee, or forget about residual.
Click to expand...

Pls explain more about this...what does this mean...am I right in thinking...it means that after 5 years, they must buy the car back fo rth res amount or more, or just covering the res amount? Somehow they will prolly add conditions to this right? Like it must be less than 100 000km's after 5 years, in good condition etc???
 
I was in a similiar situation. Car was the same price too.
After alot of calculations, I decided to just keep my current car
for a little while longer. I can do much better things with that amount of money.
You still young, so why dont you wait a few years before you splash
out on an expensive car? :)

Good luck dude.
 
Viper25 said:
I was in a similiar situation. Car was the same price too.
After alot of calculations, I decided to just keep my current car
for a little while longer. I can do much better things with that amount of money.
You still young, so why dont you wait a few years before you splash
out on an expensive car? :)

Good luck dude.
Click to expand...

A.C is this you? You sound like my wife LMAO...no disrespect, but like I said...I REALY want that car...I can afford a car of 250k comfortably...but this one, with residual is in my grasp now...damn!

If only I had a wife that understands...we CAN live in a flat AND drive an exp car..!!!LOL
 
ALFAHOLIC said:
My thinking thus far is along these lines....

Get a car I GENERALLY Can't afford through residual/babaloon payment that somehow makes it more affordable.

After 5 years I plan to sell the car for more than the residual amount owed...

This to me...sounds like the best plan in the world...

Somehow I doubt its this easy?

Dolby you are PRO residual...help a brother out!
Click to expand...

My last few cars were all with baballoon payments. But with a guaranteed buy-back.

The things to be careful of -

1) you'll need a deposit for the next car - so cash flow is important
2) there are always deductions when you give it back - nicks, dents, whatever - so cash flow is important

I wouldn't even consider it without a guaranteed buy-back. Too risky.
 
It lowers repayments with the downside that, after 5 years, the bank still owns the engine, gearbox & alloys. You can refinance this amount over a further 2 years if I recall, but most people would then trade in the car. You should recover enough to settle the bank and maybe have a bit left over for a deposit. However, I'd be very, very, very, very, very, very, very, very, very, very weary of taking a residual on an Alfa... very. You know a rotting sheep carcass holds value better than an Alfa. I wouldn't do it.

As for calculating value loss - the industry average is ± 47% of original value retained after 5 years, assuming that the car remains accident free & the mileage is inline with about 25-28,000km covered per year. Problem is, an Alfa is unlikely to perform anywhere near average. :(
 
Last edited:
You must log in or register to reply here.
Back
Top
Sign up to the MyBroadband newsletter
X