Early Settlement - Question about Residual

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srothman

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I'm looking to settle the finance for one of my vehicles that have a residual value attached to it. Having never done this, I'm not sure how it will work.

Will I be liable for the residual amount immediately after settling the balance? I'm not looking to refinance the amount, and I just don't want to put myself in an awkward financial position if I decide to do this.

Also, do I need to contact the dealer upon settling the account, telling them "Hey, I owe you money!"?

Thanks
 
srothman said:
I'm looking to settle the finance for one of my vehicles that have a residual value attached to it. Having never done this, I'm not sure how it will work.

Will I be liable for the residual amount immediately after settling the balance? I'm not looking to refinance the amount, and I just don't want to put myself in an awkward financial position if I decide to do this.

Also, do I need to contact the dealer upon settling the account, telling them "Hey, I owe you money!"?

Thanks
Click to expand...

I honestly have no idea. Are you just settling your principle debt not the residual? Would it not be better to settle the residual then pay the monthly instalment still? Actually as I type this I think this is what the Bank will want you to do.
 
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You have to contact you financier and ask for a quote on settlement at this point.

Has nothing to do with the dealer, they wash there hands on the day you drive the car away. Financier pays them for the value of the car upfront and recoups it from you with interest.

Make sure the residual being quoted on your statements includes the VAT when taking everything into account, the !@#$'s show it Ex-Vat to make you think its cheaper to run out the finance than settle early. Although I think there was a ruling against this practice, but just make sure.
 
Thanks guys. I phoned the bank earlier to get an early settlement amount, which they promptly provided me with, but now I don't think it includes the residual. I'll shoot them a mail and ask if it does. The settlement amount seems a bit light.
 
A residual amount is just a portion of the debt that remains after the loan period. This can be refinanced after your "last" payment or settled. If you want to settle the debt now I'm guessing you also want to settle the residual which is still attracting interest. It has nothing to do with your dealer as they received their money from the bank or institution providing the finance when you bought the car.

You should be getting a statement with the total debt owed excluding interest but it may not be up to date wrt interest so ask for a current quote on the total amount including the residual.

EDIT: I see you've done that.
 
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srothman said:
Thanks guys. I phoned the bank earlier to get an early settlement amount, which they promptly provided me with, but now I don't think it includes the residual. I'll shoot them a mail and ask if it does. The settlement amount seems a bit light.
Click to expand...

Ask for a settlement letter stating that settlement amount. You'll need that for your records anyway.

How much was the residual? How many months into the agreement are you settling? How much were you expecting the settlement to be and how much is it actually?
 
I'm settling about halfway through, and I always assumed the residual wasn't included in the statements. Don't know why.

Settlement letter I got from the bank explicitly mentions that it includes VAT.

I'm not sure how much I was expecting it to be, lol... Just more. I sent a mail back to the bloke to make sure the quoted value includes any and all outstanding balances, will see what he says.

Well, if that's what it is, then that's what it is. I guess I've just sort of lost track with payments and how quickly time flies.

Edit: I'll go through the latest statements and what not, but after making some quick sums in my head I guess it could be accurate. But I'll double-check with the bank. Maths has never been my strong suite.
 
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srothman said:
I'm settling about halfway through, and I always assumed the residual wasn't included in the statements. Don't know why.

Settlement letter I got from the bank explicitly mentions that it includes VAT.

I'm not sure how much I was expecting it to be, lol... Just more. I sent a mail back to the bloke to make sure the quoted value includes any and all outstanding balances, will see what he says.

Well, if that's what it is, then that's what it is. I guess I've just sort of lost track with payments and how quickly time flies.

Edit: I'll go through the latest statements and what not, but after making some quick sums in my head I guess it could be accurate. But I'll double-check with the bank. Maths has never been my strong suite.
Click to expand...

Yea, cut the residual :)
 
The way it always worked with me (SBSA and Wesbank).

When you buy car for x, the agreement you go on with the bank is to pay that "loan amount" back over the period agreed upon.
So if you take a residual, it would make your monthly payments cheaper, and then the last payment would be the big one.

So if you ask a settlement amount/letter from your bank, they give you the amount needed to settle this loan in full. There wouldn't be funny amounts afterwards.
They also state that this amount is valid for 7 days or so, and included all payments that need to be made on time as per agreement.

So you can be sure if your normal Debit Order/Payment went through month end, or the 2nd, then the amount they say is what you owe.
 
If this is the case, then life, she is preeeeetty :)

Had a look on a recent statement now. the principle debt is specified there. I assume this is exactly that, regardless of the percentage/amount that was agreed on as residual, i.e. the balance on the statement (which is obviously a little bit more than the early settlement amount) is pretty much what I need to pay the bank so that we can go our merry separate ways.

Well, I've realized two very big things...

1) Residual sucks balls! never again!
2) I don't pay nearly enough attention when it comes to owing people money and stuff.
 
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True,

The guys here had a hell of a discussion the other day about this residual thing.
I have to agree that it's not a great plan (in fact financially stupid), but in my case it make financial sense. (When you buy a car for business and do 34k+ km per year )

I see it as renting the car for 2.5 years. I can't do anything to the car, and believe in anyway "Standaard is Koning" so keep it stock standard. But every 2-3 years I have a new Audi. ("renting")
 
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Settlement figure includes the residual.

Not quite as bad as people make out, eh?
 
OK, so not to belabor the point, and just as matter of interest, how will this have been different (if at all) with a balloon payment as opposed to a residual value? Or still, settlement = total monies owed?
 
Settlement = total cost of financing the vehicle.

You would just have to pay more or less at the stage you settle, depending of the size of final payment.
 
Settlement figure always include the residual (if there is one)
 
Yip, confirmed, if I pay them the value quoted on the settlement letter I'm done. Nice little R45k bonus there, so to speak :)
 
srothman said:
OK, so not to belabor the point, and just as matter of interest, how will this have been different (if at all) with a balloon payment as opposed to a residual value? Or still, settlement = total monies owed?
Click to expand...

You likely technically do have a balloon payment on your agreement, rather than a residual. The terms have become interchangeable in general discourse. The nett effects are comparable, but residuals normally imply guaranteed buy-backs, leases and the like.
 
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