Posted by: Anon | 2005/07/18

Car Advice

I know this not health related but I desperately need advice.

I recently (in March) bought a car on 40% residual (stupid I know) . I have heard numerous stories about high residual values, and I am just scared and frustrated. What is the best thing for me to do now, to avoid being in huge debts or financial trouble. What was suggested to me, was that I take it in after a year or two. I really dont understand the whole process. And I had one malicious sales person helping, thats why I ended up with this high residual value in the first place. Please I desperately need advice.

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Our expert says:
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As I don't understand the process, either, I hope one of our regulars or irregulars can help here

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Our users say:
Posted by: Deubel | 2005/07/18

Yes, it is the same as borrowing the 40% from the bank and just paying the monthly interest on that amount. The amount stays the same over the repayment period but you have to pay it as a lump sum at the end of the payment period.

The idea is that the residual value will be equal to the 40% amount, so you will have to sell the car to pay the final amount. You end up with nothing and no car after that. Very costly exercise indeed. The only winners are the bank, the dealer and the sales person.

Reply to Deubel
Posted by: Purple | 2005/07/18

What a residual does is trap you into changing your car every year or two, but never outright actually owning a car. You keep having to change it in order to avoid paying the balloon payment at the end. This means that instead of your car payments taking a lesser chunk of your salary as you pay the car off, its always the same amount percentage wise.

What you can do is to either contact the bank and ask them about your options. They will help you by giving various options as its a problem for them if you get into debt, not just your problem.

The other option is to start saving up for that 40%, then pay it at the end of the term, drive your car for another 5 years and trade it in for a new car, you will have its trade in value, plus the amount you have saved in not making repayments for 5 years.

If you can get hold of yesterdays sunday times, there is an excellent article on exactly this on the front page of the business times. Its headline is something to do with private leasing.

Reply to Purple

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