Residual payment options

[marco79]

The financed portion of my parents car would be settled by end of April. They still have a R45000 residual that needs to be paid.

What would their options be to pay this amount, besides a once off payment? Would the bank refinance it? Generally speaking, what time-frame would be offered and would it be at a similar interest rate as the current finance agreement?

 

[FalconZA]

1) pay the amount cash
2) refinance the amount (terms will be very similar to what they negotiated the first time round)
3) sell the car and pay off the balance
4) some deals will let you hand the car back to the dealer on condition of starting a new lease option on a new car

those are generally your options

 

[marco79]

They are think of option 2. They both are at retirement age and my mom is basically only working to pay the car. As soon as she's done paying the car she'll stop working.

I wanted to suggest option 4, but that means 4 to 5 more years of payments.

 

[FalconZA]

Why not sell it and finance a newer, smaller car on a normal loan agreement? (since they are retiring)

 

[AlmightyBender]

They are think of option 2. They both are at retirement age and my mom is basically only working to pay the car. As soon as she's done paying the car she'll stop working.

I wanted to suggest option 4, but that means 4 to 5 more years of payments.

4 is definitely the worst option. If they are near retirement they need to close off as much debt as possible as there is huge risk due to their very short time span to fix a financial issue if one arises. For the average person being in debt in or around retirement is incredibly risky.

 

[Hemi300c]

What is the car worth vs R45 000?
How old is the car?
Also are they happy with the car and is it reliable and does it suit their retirement needs?

Only with the above info will you basically get relevant answers.

 

[marco79]

Its a 2009 Honda Jazz EX 1.5 vtec auto. IIRC about 135k km on the clock, maybe slightly less. The car is in good nick. Cambelt service done recently, they will be replacing the brakes this week. I think this is their 2nd set of brakes since new. They are still comfortable with the car. Although my mom thinks the shocks needs replacing soon.

Trade is probably about R90k?

 

[Fazda]

Always try and settle a residual without re-financing. The smaller amount will attract highish rates as well, so not ideal to re-finance. If you trade it in to settle it, you are basically back to square one, so it's catch 22 if you don't have the cash.

This is one of the biggest drawbacks of a RV, which should really be avoided if at all possible. Basically you should buy within your means and don't get swept up in the hype to buy a new car at a great sounding price - it always catches you in the end.

 

[Bismuth]

Do they have an access bond?

I am not financial expert here, but would that be a good option here to finance the outstanding amount?

Although, maybe not if they are near retirement.

B

 

[marco79]

I said my mom should find out from the bank what sort of finance agreement they can offer wrt. terms & interest. They are visiting me over easter and will hear what the bank says.

My first thought was to trade the Jazz in on a new grand i10/i20/Rio/etc over 48 months and see if the payments comes out to what they are currently paying.

 

[Fazda]

I said my mom should find out from the bank what sort of finance agreement they can offer wrt. terms & interest. They are visiting me over easter and will hear what the bank says.

My first thought was to trade the Jazz in on a new grand i10/i20/Rio/etc over 48 months and see if the payments comes out to what they are currently paying.

Going into retirement with a whole bunch of payments still owing is not clever - trust me, I retired in August and suddenly anything that looked affordable before that, is no longer so.

A new car would be great, but your Mom is probably going to have to keep working for an extra few years, just to make certain that the fixed income doesn't back track too fast.

 

[AlmightyBender]

Honda is bullet proof, if well maintained it will last a very long time. Keep it!

 

[marco79]

Honda is bullet proof, if well maintained it will last a very long time. Keep it!

This is the best option. They have a great mechanic that will service and do repairs when needed. The car is out of warranty, no need to bank-role the dealership anymore.

 

[Priapus]

Option 2 seems like the most sensible thing to do here. Maybe try pay as much off the 45k with cash and finance a lower amount. Pay it over a year or two and its done.