Residual

Back to the residual question guys . If I take a 10 to 15% residual and I magage to raise the money before the end of my finance term, will I be allowed to pay off the residual value sooner?
 
Kbeat said:
Back to the residual question guys . If I take a 10 to 15% residual and I magage to raise the money before the end of my finance term, will I be allowed to pay off the residual value sooner?
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You should be allowed to pay it off sooner, like you are allowed to settle the debt of car finance without residual.
 
I have a feeling that you wont be able to until you have paid off the balance of the loan.

The reason is, banks earn more interest on loans that include a residual. They are going to want the interest which they budgeted for. If they allow you to pay the residual off earlier, then they reduce the interest they will be receiving. So I have a feeling they will say, you can pay money into the bond, but it will go to the normal balance first and the residual second. Not sure though, dont work for a bank, just guessing.
 
Thanks guys, I just called MFC and they told me that you can settle your residual earlier, even if you make an additional payment you have an option of paying it either towards your capital or residual. To me a residual is just a delayed deposit with interest. I think I am going to buy something better on residual .
 
Kbeat said:
Thanks guys, I just called MFC and they told me that you can settle your residual earlier, even if you make an additional payment you have an option of paying it either towards your capital or residual. To me a residual is just a delayed deposit with interest. I think I am going to buy something better on residual .
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Very interesting actually...

Does make things different with the right value of residual then.
 
ToxicBunny said:
Very interesting actually...

Does make things different with the right value of residual then.
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Yes true Toxin, instead of waiting longer to save for deposit and getting your dream car, you can use the bank to fast track things.
 
I understand how residual works and why it's not a good option...but what I don't get is how this option is still around???? The "new" NCA is there so we dont get ourselves in a mess financially, right...but now you have this option to finance a car on residual. WTF? You most likely will land up in financial turmoil with residual...so why is this option even allowed?

Was residual only introduced to allow people to finance cars more expensive than they can "afford"? I mean, why is there even this option when it seems like such a huge financial risk? :wtf:
 
CrazyFig said:
Was residual only introduced to allow people to finance cars more expensive than they can "afford"? I mean, why is there even this option when it seems like such a huge financial risk? :wtf:
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The worst case you lose your car or have to refinance. It's a stupid thing to go for because it costs you way more in the long run, but you can't bury yourself with it as long as you can afford the monthly payments.
 
CrazyFig said:
I understand how residual works and why it's not a good option...but what I don't get is how this option is still around???? The "new" NCA is there so we dont get ourselves in a mess financially, right...but now you have this option to finance a car on residual. WTF? You most likely will land up in financial turmoil with residual...so why is this option even allowed?

Was residual only introduced to allow people to finance cars more expensive than they can "afford"? I mean, why is there even this option when it seems like such a huge financial risk? :wtf:
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Agreed on residual being a bad thing generally...

But say a 10% residual on a vehicle, does make the monthly repayments lighter, and if you can pay the residual off over time then its more like a delayed deposit than a big lump sum at the end (IF you have the financial willpower)
 
ToxicBunny said:
Agreed on residual being a bad thing generally...

But say a 10% residual on a vehicle, does make the monthly repayments lighter, and if you can pay the residual off over time then its more like a delayed deposit than a big lump sum at the end (IF you have the financial willpower)
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Thats exactly what I was going to say, if its a lower percentage then its fine and its not risky.
 
Kbeat said:
Thats exactly what I was going to say, if its a lower percentage then its fine and its not risky.
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A simple truth; if you don't have the money now for a deposit it is unlikely you are going to have the money then for a residual. Our behavior does not change overnight. If you need a residual, you can't afford it. Buy a cheaper car.
 
Brenden_E said:
A simple truth; if you don't have the money now for a deposit it is unlikely you are going to have the money then for a residual. Our behavior does not change overnight. If you need a residual, you can't afford it. Buy a cheaper car.
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Excellent advice!
 
Brenden_E said:
A simple truth; if you don't have the money now for a deposit it is unlikely you are going to have the money then for a residual. Our behavior does not change overnight. If you need a residual, you can't afford it. Buy a cheaper car.
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Not really? It depends heavily on current situations. Maybe he has a few other loans to pay off? Maybe he's expecting financial growth at least a few times during 5 years, I know I as sure as hell am. 5 years ago I had peanuts compared to what I have now.
 
Brenden_E said:
A simple truth; if you don't have the money now for a deposit it is unlikely you are going to have the money then for a residual. Our behavior does not change overnight. If you need a residual, you can't afford it. Buy a cheaper car.
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Circumstances can change dramatically in 5 years though. You can start increasing your repayments as you get increases or bonuses etc... And if the loan is under 250k there is no penalty for doing so.
 
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