Vehicle payment : Installment vs lease

Dolby

Dolby

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I know with lease you don't own the car and installment you do - but if I use the calculator at R100,000.00, with 10% deposit and 10% balloon payment/residual, 10% interest over 54 months I get :

Installment : R2,199.00
Lease : R1,930.00

Now at the end of the term one you've paid the residual, the car is yours in both cases? So one should take lease and save R250+pm?
 
Residuals are silly. I don't understand why people take them and think that they are saving money at the end of the day. When in the long run you aren't.
 
But in this case both are 10% ... so both are R10,000 ... why is one cheaper monthly? One would that R10,000 be more?
 
Serqet said:
Residuals are silly. I don't understand why people take them and think that they are saving money at the end of the day. When in the long run you aren't.
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That's not really true.

If you have a plan, what's wrong with it? I bought my car with a residual when 26 knowing full well that at age 28 I get some money from inheritance to pay off the car. For 2 years I had the beneift of saving on the premiums (extra money helped me!) and clear the residual, with very little extra interest over an ISA.

Also - some guys take a slight a risk and put the money they save into an investment, so come the end of the period they have the same (if not more) money to cover the residual at the end. If you have a plan, it's not *always* bad
 
Dolby said:
But in this case both are 10% ... so both are R10,000 ... why is one cheaper monthly? One would that R10,000 be more?
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AFAIK leasing does not require an upfront deposit, which would explain the price discrepancy.

At the end of the leasing period, the car is still not yours. A residual payment does not change that because your lease agreement will usually specify that you have to pay Rx in y months.
 
Dolby said:
But in this case both are 10% ... so both are R10,000 ... why is one cheaper monthly? One would that R10,000 be more?
Click to expand...

I suspect your calculations are out

If you worked on a deposit of 10% and 54 installments for the installment sale and 54 lease payments and a residual of 10% for the lease then the lease installments would be more than the installment sale payments due to the fact that you have borrowed more money for longer.

Edit: Unless the lease option has both an initial balloon payment of R10000 and a residual of R10000 which explains why the lease is cheaper.
 
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Dolby said:
That's not really true.

If you have a plan, what's wrong with it? I bought my car with a residual when 26 knowing full well that at age 28 I get some money from inheritance to pay off the car. For 2 years I had the beneift of saving on the premiums (extra money helped me!) and clear the residual, with very little extra interest over an ISA.

Also - some guys take a slight a risk and put the money they save into an investment, so come the end of the period they have the same (if not more) money to cover the residual at the end. If you have a plan, it's not *always* bad
Click to expand...

That's a different story. I agree if you know you are going to have the money to settle the outstanding amount when it comes time to do so then fair enough. Unfortunately i know of a few people who took the residual without making any plans and that's just naive.
 
Last time I checked, with the lease you are limited to certain no of KM per year and you paid extra per km.
 
Well i took the highest residual i could on my car and difference in payments was a lot more than 250 rand.

I understand that it is not the smartest thing to do but if you cannot afford anymore than that it is not the end of the world. You either refinance or just save a little extra every month if you have spare cash and pay off the balance.
 
I'm going to buy my next car on lease and here is why.

If you lease a car it's the property of the Garage, you pay your installments and they look after the car, everything in relation to the car services and so forth. At the end of the lease period you have 2 choices, buy the car out with the baloon payment or get a new car.

I'm sick of paying off cars now, I want to drive a brand new car every 3 years :p
 
Pitbull said:
I'm going to buy my next car on lease and here is why.

If you lease a car it's the property of the Garage, you pay your installments and they look after the car, everything in relation to the car services and so forth. At the end of the lease period you have 2 choices, buy the car out with the baloon payment or get a new car.

I'm sick of paying off cars now, I want to drive a brand new car every 3 years :p
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Do they also pay for insurance/maintanence ?
 
I don't see much wrong with a lease, pay less per month and get a new car every 2-3 years, or sometime before the cars trade in value becomes less than the residual remaining. I'd go with 25% to 35%, don't make it too high.
 
Serqet said:
Residuals are silly. I don't understand why people take them and think that they are saving money at the end of the day. When in the long run you aren't.
Click to expand...

Serqet said:
That's a different story. I agree if you know you are going to have the money to settle the outstanding amount when it comes time to do so then fair enough. Unfortunately i know of a few people who took the residual without making any plans and that's just naive.
Click to expand...

The thing with residual is that most people don't ask themselves the question whether they believe their car will be worth the residual when the financing term ends. Because then what happens is that it essentially forces you to refinance. Oh and of course you are taking a punt on your creditworthiness when your finance matures.

If you have a knowledge of finance then it is whether you pay the deposit now or later. And if you know finance then you have the tools to make the decision.

Pitbull said:
I'm going to buy my next car on lease and here is why.

If you lease a car it's the property of the Garage, you pay your installments and they look after the car, everything in relation to the car services and so forth. At the end of the lease period you have 2 choices, buy the car out with the baloon payment or get a new car.

I'm sick of paying off cars now, I want to drive a brand new car every 3 years :p
Click to expand...

That sounds much like a motorplan. Whereas the motorplan car becomes a asset on my books and i can keep it for another 5 years if I so wish (obviously with the costs of servicing an out of motorplan car)?
 
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