Car Debt - Balloon Payments

[WollieVerstege]

Original finance amount - R470k
Settlement Balance - R370k
Trade value - R290k
Interest - 8.25%
Term - 48 months left (initial term 78 months)

The Trade value, is that an actual offer you have received or some random number from a website? Second hand car values have gone nuts in the last couple of years, so might not be as bad if you get an actual offer.

That said, based on your lifestyle there is really nothing to replace it with that will compare. Get something smaller and you end up struggling to tow and end up break things or using much more fuel than needed. OR it becomes dangerous trying to overtake on the roads. Towed a Bushlapa Kewer once with a Duster - never-ever again.

Best advice is to start scrounging some money now for that balloon payment and save it somewhere. High milage on a diesel should net have major maintenance issues in the long run.

Worst case scenario, pay the balloon from your bond (if available and the interest is lower) and then pay that off ASAP.

 

[R13...]

The ranger should hold its value well, so you may well be able to settle it for its resale value at the end of term. Your high mileage will bite, but that can be fixed

 

[RonSwanson]

Original finance amount - R470k
Settlement Balance - R370k
Trade value - R290k
Interest - 8.25%
Term - 48 months left (initial term 78 months)

With those figures, what is your risk exposure in event of an insurance claim? If it gets stolen today, or written off, it seems to me that you still have 80K to pay.

Too much risk for me personally. I'd flog it immediately. Sell the trailer and camping goodies too, to offset as much of the 80K as possible, and then kill the balance with some belt-tightening cash deposits. The sooner the better.

 

[Gtx Gaming]

Drive it until the wheels fall off and save up for the balloon. You can refinance the balloon if you have to.

 

[Sinbad]

If you have 48 months left, can you not start saving towards the R150k?

R3k a month will get you close in raw terms, put it into something that earns interest and you should get past R150 in that time frame.

Put that money into the finance agreement. It's unlikely you'll find an interest-bearing vehicle with a higher rate than the interest rate on the finance.

 

[Scooby_Doo]

Put that money into the finance agreement. It's unlikely you'll find an interest-bearing vehicle with a higher rate than the interest rate on the finance.

For sure, I am just not sure what the limits or penalties are for paying more into the vehicle finance. (If any)

 

[Sinbad]

For sure, I am just not sure what the limits or penalties are for paying more into the vehicle finance. (If any)

Only a possible early settlement penalty. Otherwise no limits or anything.

 

[F1 Fan]

Original finance amount - R470k
Settlement Balance - R370k
Trade value - R290k
Interest - 8.25%
Term - 48 months left (initial term 78 months)

So if you pump an extra 3k a month into it, you should pay off the balloon and be able to keep the car right?

 

[Aeryn23]

Rangers are high risk vehicles for theft. If your vehicle gets stolen, will insurance cover the shortfall? This is important to take into consideration. It increases or decreases the risk of your situation.

I have done balloons before. I wouldn't do it again unless I had a guaranteed buy back value and low mileage.

 

[jnvdh06]

The Trade value, is that an actual offer you have received or some random number from a website? Second hand car values have gone nuts in the last couple of years, so might not be as bad if you get an actual offer.

That said, based on your lifestyle there is really nothing to replace it with that will compare. Get something smaller and you end up struggling to tow and end up break things or using much more fuel than needed. OR it becomes dangerous trying to overtake on the roads. Towed a Bushlapa Kewer once with a Duster - never-ever again.

Best advice is to start scrounging some money now for that balloon payment and save it somewhere. High milage on a diesel should net have major maintenance issues in the long run.

Worst case scenario, pay the balloon from your bond (if available and the interest is lower) and then pay that off ASAP.

The R290k was a trade in offer from Ford.
I can get around R330k when selling privately.

 

[jnvdh06]

Rangers are high risk vehicles for theft. If your vehicle gets stolen, will insurance cover the shortfall? This is important to take into consideration. It increases or decreases the risk of your situation.

I have done balloons before. I wouldn't do it again unless I had a guaranteed buy back value and low mileage.

I quickly had a look at my insurance. Looks like it only covers around R320k.

 

[jnvdh06]

With those figures, what is your risk exposure in event of an insurance claim? If it gets stolen today, or written off, it seems to me that you still have 80K to pay.

Too much risk for me personally. I'd flog it immediately. Sell the trailer and camping goodies too, to offset as much of the 80K as possible, and then kill the balance with some belt-tightening cash deposits. The sooner the better.

This is probably the best answer, financially speaking.

It will however require a lot of compromise.
My wife and I really love camping and only got the trailer about 8 months ago. So it would be real sad to sell it now.

The reason I started thinking about my car’s balloon payment and finance was due to the state of the economy and everything getting more expensive. Haven’t had a raise in 3 years.
And the price of petrol and diesel is getting insane.

So I am just worried that in the future we might get more and more cash strapped.
At this stage we are luckily still okay but it’s just in the back of my mind the whole time.

 

[RonSwanson]

This is probably the best answer, financially speaking.

It will however require a lot of compromise.
My wife and I really love camping and only got the trailer about 8 months ago. So it would be real sad to sell it now.

The reason I started thinking about my car’s balloon payment and finance was due to the state of the economy and everything getting more expensive. Haven’t had a raise in 3 years.
And the price of petrol and diesel is getting insane.

So I am just worried that in the future we might get more and more cash strapped.
At this stage we are luckily still okay but it’s just in the back of my mind the whole time.

I agree that it's a lot to compromise on, it is never easy to downgrade a lifestyle.

I also had a double cab bakkie and a caravan once, at the time I worked out that if I am not going camping at least 4-6x per year for a week each time, it's actually a loss. Camping goodies cost a fortune too, and there is always a new nicknack, doodah or gizmo that one just has to have, and I ended up with a garage full of seldom used gimmicks. It was actually a huge relief to me once I sold it all.

The other way is to take the risk. Nothing ventured, nothing gained. And make sure that you get the reward, go camping every second weekend.

 

[Aeryn23]

Could you not get rid of the Ranger and buy a cheaper bakkie with no balloon so you can continue with your lifestyle? You may take a knock at first to get rid of the shortfall but in the long run its less risky.

 

[TheChamp]

Could you not get rid of the Ranger and buy a cheaper bakkie with no balloon so you can continue with your lifestyle? You may take a knock at first to get rid of the shortfall but in the long run its less risky.

With the outstanding debt and shortfall it looks like sticking with the Ranger is the best way for now, a GWM P Series would have been the best decision at the time he bought the Ranger, but what's done is done.

Since he is also using it as a family car whatever he changes it for should be at the same standard, with what he going to get for the Ranger, the debt and the shortfall, I just don't see too many options.

 

[rodga]

It feels like I am currently in a difficult situation vehicle wise.

I am a medical rep and drive around 30-40k km a year.

Two years ago I purchased a Ford Ranger, which I am very happy with, but stupidly opted in for a balloon payment. (I also loaded some cash I owed from my previous vehicle)
I currently have around 75k km on the clock, which is still low.

Over the last few months, the thought of the balloon payment has really started bothering me.

I still have 48 months of repayments left and then I have to pay the balloon of around R150k.

I have thought of trading in and purchase a cheaper vehicle but I still have around R80k shortfall that is going to have to be loaded on the new vehicle.

The problem also is we live quite an outdoor lifestyle and we have a camping trailer which needs a big tow vehicle, so I smaller vehicle won’t work.

The other option is I pay off the bakkie for 48 months and then refinance the balloon?

My monthly repayment is around R7k per month, which isnt too bad.

If I buy a cheaper vehicle and finance it over 4 or 5 years then repayments are around R5k per month, so it isnt saving loads of money.

So I dont really know what to do at this stage.

Sorry if I am rambling. Tried to explain the situation the best I can.

Any updates?

 

[rh1]

I spoke to a sales rep who made balloon work for him, he was very particular on the car he purchased, he would buy a low mileage 2 year old car (under 10k) with balance of maintenance plan that kept its sales value relatively well. Drive it for 1 year and trade it in and repeat, he did about 40k a year, and the milage would average out over the three years and thus not affect the trade in.