-
Join the MyBroadband community
South Africa’s biggest forum. Discuss, discover, and connect with thousands of members.
-
Question of the Day: Are you for or against worker unions?
Residual or 72 months?
- Thread starter Bionic
- Start date
I managed to get to the point where I needed to refinance and decided to sell the car and walked away with 90k!
But you are correct. If you're going with residual choose a car with a good resale value!
F
Former member 61586
Guest
where did I say you must buy cash? :wtf:
"Buying with finance over 5 years or buying with residual is a bad idea. Live within your means."
I gathered from your post that you meant buying on finance is a bad idea.
Unless I misunderstood you and you meant, buying on finance under 5 years is the smarter option?
Here's my opinion.
1) Never buy a new car or a demo car.
2) Buy a car that is at least 3 years old.
Why put your hard earned cash into a depreciating asset.
If you want to spend 200k on a car an you have 200k cash, dont but it cash! Dont even put a deposit.
I'd buy it on residual. Residual only hurts you if you dont pay the ballon payment on time or if you refinance it otherwise is the same as HP.
I'd take my 200k cash and invest it, where i will look to double it in 5/6 years time or even quicker...At this time i would of paid of my car with my monthly installments and i would off paid around 60k-80k interest.
I now would of saved +-400k minus the interest i paid
Not many people think like this!
1) Never buy a new car or a demo car.
2) Buy a car that is at least 3 years old.
Why put your hard earned cash into a depreciating asset.
If you want to spend 200k on a car an you have 200k cash, dont but it cash! Dont even put a deposit.
I'd buy it on residual. Residual only hurts you if you dont pay the ballon payment on time or if you refinance it otherwise is the same as HP.
I'd take my 200k cash and invest it, where i will look to double it in 5/6 years time or even quicker...At this time i would of paid of my car with my monthly installments and i would off paid around 60k-80k interest.
I now would of saved +-400k minus the interest i paid
Not many people think like this!
Here's my opinion.
1) Never buy a new car or a demo car.
2) Buy a car that is at least 3 years old.
Why put your hard earned cash into a depreciating asset.
If you want to spend 200k on a car an you have 200k cash, dont but it cash! Dont even put a deposit.
I'd buy it on residual. Residual only hurts you if you dont pay the ballon payment on time or if you refinance it otherwise is the same as HP.
I'd take my 200k cash and invest it, where i will look to double it in 5/6 years time or even quicker...At this time i would of paid of my car with my monthly installments and i would off paid around 60k-80k interest.
I now would of saved +-400k minus the interest i paid
Not many people think like this!
Interesting post, I am keen to hear more.
You say that the balloon payment is what hurts, which makes sense, but aren't you spending way more on the car even if you can come up with the balloon payment at the end?
And no deposit? Is this even possible on a 3 year old car? Surely then your monthly's are sky high without one?
I agree though, you would be better off investing that money than putting down a big deposit.
Im glad
The balloon payment is what hurts you is because not many people cannot come up with the cash, so they have to refinance it. Some people even trade in their cars when they have to pay the balloon payment. They digging their hole deeper and deeper. Basically they will forever be paying for a car, and they will be taking most of the depreciation all the time since a car loses most of its value in the first 2years. Not smart.
Even if you have to put in a deposit...put in the minimum! For every 50k your car costs it should roughly count for an extra 1k pm.
Remember if your interest rate on your loan is say 13%, i'd bet my money i could make more than that per annum investing it.
The other option is, if investing is too difficult/a pain for you is to buy a cheap car cash(say 80k).
Im eager to here other's views.
Last edited:
Im glad
The balloon payment is what hurts you is because not many people cannot come up with the cash, so they have to refinance it. Some people even trade in their cars when they have to pay the balloon payment. They digging their hole deeper and deeper. Basically they will forever be paying for a car, and they will be taking most of the depreciation all the time since a car loses most of its value in the first 2years. Not smart.
Even if you have to put in a deposit...put in the minimum! For every 50k your car costs it should roughly count for an extra 1k pm.
Remember if your interest rate on your loan is say 13%, i'd bet my money i could make more than that per annum investing it.
The other option is, if investing is too difficult/a pain for you is to buy a cheap car cash(say 80k).
Im eager to here other's views.
Makes sense, but assume you have the cash to settle the balloon, how much extra are paying for the car apposed to buying without a residual? Aren't you still paying a good fortune more?
Investing the money is a good option, assuming you can get a good return.
Im glad
The balloon payment is what hurts you is because not many people cannot come up with the cash, so they have to refinance it. Some people even trade in their cars when they have to pay the balloon payment. They digging their hole deeper and deeper. Basically they will forever be paying for a car, and they will be taking most of the depreciation all the time since a car loses most of its value in the first 2years. Not smart.
Even if you have to put in a deposit...put in the minimum! For every 50k your car costs it should roughly count for an extra 1k pm.
Remember if your interest rate on your loan is say 13%, i'd bet my money i could make more than that per annum investing it.
The other option is, if investing is too difficult/a pain for you is to buy a cheap car cash(say 80k).
Im eager to here other's views.
Why on earth do you want to pay cash for the balloon payment? At no time should you ever pay cash for a depreciating asset!
SaiyanZ
Executive Member
Im glad
The balloon payment is what hurts you is because not many people cannot come up with the cash, so they have to refinance it. Some people even trade in their cars when they have to pay the balloon payment. They digging their hole deeper and deeper. Basically they will forever be paying for a car, and they will be taking most of the depreciation all the time since a car loses most of its value in the first 2years. Not smart.
Even if you have to put in a deposit...put in the minimum! For every 50k your car costs it should roughly count for an extra 1k pm.
Remember if your interest rate on your loan is say 13%, i'd bet my money i could make more than that per annum investing it.
The other option is, if investing is too difficult/a pain for you is to buy a cheap car cash(say 80k).
Im eager to here other's views.
Why would you want to pay the balloon payment off as a lump sum if you can refinance, pay it off slowly, and invest the money you are saving? Surely this is the same as you say for the 1st five years?
There are only two options regarding the money side of things:
1. If you can get a guaranteed higher rate of interest from your investments than the interest rate on your car loan then taking residual is better. (If and only if you are investing the amount you are saving every month by taking the residual) Also paying it off as slowly as you possibly can is best.
2. If you cannot get a better rate of interest from investing then buying a car cash is the best option. Most people can't afford to buy cash so the next best thing is to take it with no residual and pay it off as quickly as possible.
I must say that option one is highly unlikey. It is difficult to find an investment that will give you a guaranteed higher rate of interest than the loan interest. Fixed interest investments don't really count as you can't deposit the money you are saving every month into the bulk of them. Equity returns are random and not guraranteed. Also, fees would be high if you're investing every month as well so the returns would be reduced.
Plus, I mean the real loan interest here. Most people are tricked into thinking that they're getting a low interest rate whilst the cost of the car is marked up to include the "hidden" interest.