Car loan - Deposit or Balloon

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bar1

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Hi,

I have some extra cash I would like to put as a deposit on a new car, but the finance person told me that I will get the best rate if I take the full amount.
so, maybe I should keep the money and get interest on it, and pay a balloon payment at the end of the term.
Do I pay interest on the balloon though?the finance person made it sound like i will not but that sound strange or maybe I didn't understand properly.


EDIT: not sure why I can't edit the subject
 
You pay interest on the balloon.

Finance the full amount without a balloon payment, and then just deposit the extra cash into the account once it's open to reduce the term.

*This does not constitute financial advice
 
schuits said:
Any interest you earn on saving will be less then interest on debt. Always settle debt first if you can.

IMO Balloon payments are a scam. They add a balloon payment to make something look affordable but at the end of the day it bites you in the ass.
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I always use to think that.
However if I need to pay lets say R100000 now or the same amount in 6 years.....then it's a no-brainer....
 
bar1 said:
I always use to think that.
However if I need to pay lets say R100000 now or the same amount in 6 years.....then it's a no-brainer....
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You're paying interest on that 100k.
 
Tell the finance person you will go somewhere else if they don't give you the best rate with a deposit.
 
Jean Claude Vaaldamme said:
Tell the finance person you will go somewhere else if they don't give you the best rate with a deposit.
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Yeah that's a good idea.
Because my plan for this is to pay XXX amount per month for the car over 5 years, and they must tell me how much deposit I need to put.
Now they are making it complicated.
 
What kind of rate I can expect, I have an excellent credit score, (Was about 700 I think last time I checked.)
 
Depending on the financial institution, you can finance the full amount with a balloon payment. In the first month you give them notice that you intend settling the balloon early. Depending on the notice period, you can then settle the balloon portion and continue with the rest of the payments as per the contract.
This will save you a lot of interest.
 
Stonemason said:
Depending on the financial institution, you can finance the full amount with a balloon payment. In the first month you give them notice that you intend settling the balloon early. Depending on the notice period, you can then settle the balloon portion and continue with the rest of the payments as per the contract.
This will save you a lot of interest.
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Interesting option.
What should i look out for?
Or is it as simple as calling them and settling the balloon.
 
A ballon payment does what the name says it does, your interest rate will be full original loan amount even if you pay it off quicker or lower the payments.

If you had to go get say a personal loan for the price of the vehicle you’ll be able to save more as you pay it off quicker and the interest rate will be calculated each month of the amount you owe.

It gets less as you pay the loan quicker.

I agree with the finance person.
 
Ask them to calculate the finance with no balloon, and zero or small deposit. This will get you the absolute best deal in terms of interest rates. Then, as soon as you have paid the first installment on the car, call the bank and tell them you want to make a lump sum payment into the finance account, and pay over what you originally planned to pay as a deposit. That will save you ton of money in interest. You can then if you want also ask them to recalculate the term - keeping the same monthly instalment, so you pay it off sooner, saving you even more in interest.
 
Zellephant said:
Ask them to calculate the finance with no balloon, and zero or small deposit. This will get you the absolute best deal in terms of interest rates. Then, as soon as you have paid the first installment on the car, call the bank and tell them you want to make a lump sum payment into the finance account, and pay over what you originally planned to pay as a deposit. That will save you ton of money in interest. You can then if you want also ask them to recalculate the term - keeping the same monthly instalment, so you pay it off sooner, saving you even more in interest.
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Thanks, leading toward this option yes.
What is considered a good interest rate to get?
 
STAY FAR AWAY FROM BALLOON!!!!!!!!!!!

By the time that is due, and you look at cars value in the market then, at the interest paid, you will cry. hard.
 
Fixed interest rate:

The interest rate stays the same for the entire life of the loan.

Variable interest rate:

The interest rate changes over time, often based on a benchmark rate like the prime rate or repo rate.

Each one has a pro and a con.
 
DarkStarMonday said:
Fixed interest rate:

The interest rate stays the same for the entire life of the loan.

Variable interest rate:

The interest rate changes over time, often based on a benchmark rate like the prime rate or repo rate.

Each one has a pro and a con.
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Good luck getting a fixed rate that is close to the Variable rate. The banks will calculate in the movement they think the variable rate will have, then factor in a margin on top of that "just in case"
 
ToxicBunny said:
Good luck getting a fixed rate that is close to the Variable rate. The banks will calculate in the movement they think the variable rate will have, then factor in a margin on top of that "just in case"
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Fixed rates are always higher, just the way the cookie crumbles and banks have to make their money’s.

Variable is like Russian roulette lol
 
DarkStarMonday said:
Fixed rates are always higher, just the way the cookie crumbles and banks have to make their money’s.

Variable is like Russian roulette lol
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Yes they are always higher, because the banks will factor in the movement they "predict" from the repo rate over the term of the loan.

Banks win, no matter which option you take, but most of the time they win more on Fixed rates than Variable Rates.
 
As a self certified myBB car finance expit, my 2cents:

Make sure you get all quotes from all the banks, stay away from inhouse finance (as they tend to have the highest interest rates). I am sure you can get your own quotes direct as well provided you dont go through the sales person as the banks wont give you the information then. This allows the sale person to only give you the quotes where he gets the highest kickbacks.
 
ToxicBunny said:
Yes they are always higher, because the banks will factor in the movement they "predict" from the repo rate over the term of the loan.

Banks win, no matter which option you take, but most of the time they win more on Fixed rates than Variable Rates.
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My wife just finished paying her car off, 3 months ago she thought she could chuck in the remaining 3 months left on the car loan ( linked to her bank profile )

The bank bitched and moaned and just carried on taking the last 3 months off her pay check. They didn’t give two ****s, they wanted that payment and minuscule interest.

****ing kants.
 
DarkStarMonday said:
My wife just finished paying her car off, 3 months ago she thought she could chuck in the remaining 3 months left on the car loan ( linked to her bank profile )

The bank bitched and moaned and just carried on taking the last 3 months off her pay check. They didn’t give two ****s, they wanted that payment and minuscule interest.

****ing kants.
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Read your contract. 3 months notice required for early settlement
 
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