Some adviice : Residual, no money, new car

[Pho3nix]

Hi all,

Just come back from my friends place and he needs some help. He bought a new car on residual and 6 months into the whole thing (3 months paying + 3 month December breather) he is having serious money problems.
Now the car was a demo with 5000km's when picked up. R550k odd, not sure about the residual percentage or the interest rate on the loan. He is trying to dig up the documents.

Now he has asked for some help and I am honestly stumped.
Only thing I could think off is he sell the car to a dealer or attempt private and take the knock financially with residual and the like.
He is talking about changing jobs to get his pension out :wtf: which I told him was a sch!t idea.

His mother is helping him out with his rent/bond at the moment and when I spoke to her she echo'd my opinion that he must take the knock but his pride it seems is acting against him.

He is turning 30 before anyone asks .

Any help would be appreciated, remember some of the constructive advice given to the other ouen who needed assistance.

Thanks in advance.

/tries to study

 

[TehStranger]

Well, can he take the financial knock if he's already struggling? How much of a knock is it?

 

[Milano]

What was the exact purchase date? Up to 6 months, search it for an undisclosed defect and return to dealer for refund under CPA.

 

[Dan C]

Not clued up about residuals, but are you even allowed to sell a residual car ? (guess so). My guess it will be a huge knock.

 

[Pitbull]

Not clued up about residuals, but are you even allowed to sell a residual car ? (guess so). My guess it will be a huge knock.

He's currently owing in excess of R 550k. So if he takes a knock of lets say R 100k It's still better than R 550k

 

[Foxhound5366]

Eish, you people don't understand residuals lol.

A residual means only two things:
1: You end up paying more interest over the long-term, because your monthly repayments are going towards less of the actual car cost (with a substantial portion reserved as the residual but still charging interest you have to pay for).
2: If you settle early, you completely ignore the residual. The bank will give you a settlement value, which is the balance of the loan at that point (excluding future-dated interest which will be payable should you go ahead with the full loan term - which they sometimes add onto the full accounts).

My guess is there is going to be a *massive* knock on a car like that, because even as a demo car it will still depreciate quite heavily immediately after purchase. In my experience, a car with a residual only starts to break-even (where you can trade it in without incurring a loss) at about the fourth year.

As an example, I once had to sell a R120 000 Renault Sandero for R80 000, even though it was only a year old (my repayments over that year basically only paid for the interest owing) ... and only got out of it thanks to a hefty trade-in assistance on my new car and a R25 000 loan I took. Not fun taking a R50 000 knock, and that was on a R120 000 car mind you. For R500 000 plus, I don't want to know!!!

 

[Pho3nix]

He's currently owing in excess of R 550k. So if he takes a knock of lets say R 100k It's still better than R 550k

My thoughts exactly.

What was the exact purchase date? Up to 6 months, search it for an undisclosed defect and return to dealer for refund under CPA.

Will ask.

Well, can he take the financial knock if he's already struggling? How much of a knock is it?

Current installment is R9k odd + R2k for household and car insurance.
He already has another paid off car.

Taking a knock and paying R5k rather as school fees over R11k is brutal but the only thing I think might even work.

I'm assuming R250-R300k knock

Will get the papers tomorrow sometime and post in thread.

 

[FiestaST]

What R550k car are we talking here?

 

[Brawler]

How the hell do people end up in these situations?!?

 

[TehStranger]

Current installment is R9k odd + R2k for household and car insurance.
He already has another paid off car.

Taking a knock and paying R5k rather as school fees over R11k is brutal but the only thing I think might even work.

I'm assuming R250-R300k knock

Will get the papers tomorrow sometime and post in thread.

Eina, that's quite heavy, but at least he has a paid off car that he can use for transport in the meantime. Looking forward to the update with actual figures so we can see just how deep in the *** your mate is and *try* offer good advice.

 

[Pho3nix]

What R550k car are we talking here?

BMW 520i Full Spec.

 

[Voicy]

BMW 520i Full Spec.

LOL! People get so annoyed at BMW / Merc / Audi drivers, but financial explanations like the ones in these threads make me smile when I'm on the road.

When I worked for Eskom, people who were in paygrades below me were buying audis and beamers with no shame trying to outstyle each other. I was earning around 20% more than them and still driving my paid off '06 Corsa where I just couldn't justify upgrading my car to even an entry level VW polo.

 

[DanH]

I love the 3month payment holiday before even starting.

3 months of interest on top of the R550k and residual.

It's an interest trap for all those who can't do math.

 

[HavocXphere]

550k car...and not sure about residual or interest...jeesuz.

Constructive advice...dunno hey...even if he sells it then he still needs wheels no?

Also...lol at mybb showing audi ads on this thread

 

[Mike Hoxbig]

A 520i, yeah good luck to him. May have had a chance to minimise the damage if it was actually a car in demand.

The only thing I can think of is to get rid of the car and settle the difference through his bond (or his mum's if she's helping him and has one).

If he has too much pride to let go, well then that's his own issue and must deal with the consequences...

 

[Jet-Fighter7700]

BMW 520i Full Spec.

Seriously insane buying a car like that,

Dosent he know buying a car like that is a financial knock, even if he can afford the payments, one of the fastest depreciating assets are luxuary cars

How much does a car like that lose on new? 25%-30% now he must pay that extra cash even if its sold,

As the other poster said, how do people end up digging themselves such graves?

 

[Venomous]

another bmw thread.

hopefully your friend did not have others telling him to buy the very nice, but waste of money vehicle.

 

[Dolby]

I'm not sure how ones financial situation can change so drastically in a few months without retrenchment or something equally as devastating?

 

[Priapus]

I'm not sure how ones financial situation can change so drastically in a few months without retrenchment or something equally as devastating?

It generally doesn't. People fail to do the math properly when deciding to buy expensive things like cars and it only hits the pocket hard after a few instalments. His financials were never in a position to support the car.

 

[OrbitalDawn]

Your friend clearly isn't very bright. Buying a ridiculous car like that, with a ridiculous residual and a ridiculous instalment on top of that, all without being financially secure? Yikes.