Outlander v Outlander PHEV v Tiguan

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Lizard1977

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#3209193 21-Mar-2024 15:36

That's what I figured. My approach in the past has always been to clear the debt as fast as possible and own it outright. The residual approach sounds like a perpetual "lease", and it doesn't appeal.

Thanks for that @sen8or, it's good to have a sense-check of these things.

At this stage, I'm inclined to go back and suggest a fairly radical counter-offer. The worst they can do is say no, and I have other options if they do say no.

gzt

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#3209261 21-Mar-2024 16:51

I've never explored the idea of finance with a residual payment. Anyone have any insights into this?

I'm curious about this too. The 'advantage' I've seen is you can in the right circumstances pay the residual with the sale of the vehicle at the end of the loan term. I have seen people do this on TradeMe. I don't know the ins and outs of the legal process required.

In finance terms extreme case you get 100% finance as some can, then you're conserving capital. Obviously there you're also reliant on several things like insurance and resale value.

Different topic you may have seen those guaranteed value schemes for new cars. Similar advantage applies.

sen8or

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#3209361 21-Mar-2024 17:12

It can help you afford a car that you might not otherwise be able to afford by lowering the monthly commitment. Provided the residual / balloon payment isn't out of whack with the vehicles expected true value at the end of the term, then it all works out.

Guaranteed Future Value mostly removes the risk of the residual value (provided you read the fine print and aware of potential reconditioning costs for any refurb beyond normal wear and tear) and as above, enables a higher initial purchase price than what you might otherwise be able to afford.

Handle9

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#3209372 21-Mar-2024 18:33

sen8or:

The finance manager will be loving your loan structure.

The cost of keeping your payments to a level you can afford is an increase in the overall cost of credit, by quite a margin. Without knowing exact specifics of your loan, a 5 year loan on a $30k purchase with a $7.5k residual will cost you $11.5k in interest approx (assuming 12%), the same loan with no residual will cost $10k in interest (the payments are about $90/mth higher across the term).

You have to think what happens at the end of the loan term too, will you have $7.5k in cash to repay, or will you have to refinance it, incurring more costs?

They'll want you to trade at that point ofcourse, get you into something else, thats their job.

Yip. Financing cars is a mugs game and destroys your wealth. It's really quite amazing when you do the maths how much financial products on cars cost.

sen8or

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#3209420 22-Mar-2024 08:12

Not necessarily, financing should be appropriate for your situation.

Putting the car on the mortgage can be a mugs game, yes your interest rate is lower, but how long are you going to be paying for it. If you have it separate and a short term (say same as normal finance, 3-5 years) then its okay, but if you just lump it in with your 20-30 year mortgage, its going to be fairly costly..

If you get paid say a vehicle allowance, financing a car or even leasing may be sensible.

Whats the opportunity cost of having $20-30k cash tied up in a depreciating asset? Could that better be utilised elsewhere for wealth accumulation (upgrades on property, investment in higher return investments etc).

Senecio

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#3209426 22-Mar-2024 08:50

Coming back to the choice of car. The Kia Seltos is a nice car but its in a completely different size class to the Outlander & Tiguan that you were looking at. The Sportage would be a more comparable car within the Kia portfolio. If you were considering the size of the Seltos but wanted to stick with Mitsubishi for the value you could look at the Eclipse Cross or even the ASX.

Handle9

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#3209432 22-Mar-2024 09:25

sen8or:
Not necessarily, financing should be appropriate for your situation.

Putting the car on the mortgage can be a mugs game, yes your interest rate is lower, but how long are you going to be paying for it. If you have it separate and a short term (say same as normal finance, 3-5 years) then its okay, but if you just lump it in with your 20-30 year mortgage, its going to be fairly costly..

If you get paid say a vehicle allowance, financing a car or even leasing may be sensible.

Whats the opportunity cost of having $20-30k cash tied up in a depreciating asset? Could that better be utilised elsewhere for wealth accumulation (upgrades on property, investment in higher return investments etc).

If you are paying 12% for car finance you need to be making at least 18% return before tax for there to be a net opportunity cost. To get that you need to get very lucky or be selling drugs.

If you are paying 1/3 extra for the car than if you paid cash it’s bad bad deal. People can do what they want with their money but it’s a good way to waste money IMO. Depreciating assets should be bought with cash, appreciating assets get bought with finance.

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duckDecoy

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#3209440 22-Mar-2024 10:00

Senecio:

Coming back to the choice of car. The Kia Seltos is a nice car but its in a completely different size class to the Outlander & Tiguan that you were looking at. The Sportage would be a more comparable car within the Kia portfolio. If you were considering the size of the Seltos but wanted to stick with Mitsubishi for the value you could look at the Eclipse Cross or even the ASX.

The Eclipse Cross boot size is bigger than it looks from the outside, worth at least having a look.

gzt

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#3209654 22-Mar-2024 21:04

I see a few ads for Lexus 7 seaters around including hybrids. Prices are high and KMs are even higher.

kiwiace

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#3209794 23-Mar-2024 10:41

Interesting thread.

At risk of hijacking it, I noticed the simplest Seltos is 30k brand new (and the step up features in the LTD look quite minor, not that I know much about cars:)

https://kia.co.nz/vehicles/seltos/range-and-specifications/

I would prefer to buy second hand if I thought I was getting value but my sense is (compared to 20 years ago) new prices are much more competitive and used prices higher. The dog and lemon guide used to say 40% depreciation in year 1 and 20% every year after that, but seems no longer the case. So have been driving a 2010 Sportage since new...

Batman

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#3209892 23-Mar-2024 15:54

kiwiace:

Interesting thread.

At risk of hijacking it, I noticed the simplest Seltos is 30k brand new (and the step up features in the LTD look quite minor, not that I know much about cars:)

https://kia.co.nz/vehicles/seltos/range-and-specifications/

I would prefer to buy second hand if I thought I was getting value but my sense is (compared to 20 years ago) new prices are much more competitive and used prices higher. The dog and lemon guide used to say 40% depreciation in year 1 and 20% every year after that, but seems no longer the case. So have been driving a 2010 Sportage since new...

wow if i were OP i'd definitely not buy aa 5 year old seltos for more than a brand new seltos

if i were the OP i'd go to every kia and haggle the Seltos and play each dealer against the other and get the lowest price

as i told the OP, cars are not selling, this is the season to haggle

Batman

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#3209900 23-Mar-2024 16:08

i found a MG ZS for 24k+, there is a $1000 discount at the moment, again i suggest haggling. the worst they can say is no. then i move on to another dealer and ask the same.

brand new, 7 year warranty BUT only 4 speed transmission

https://mgmotor.co.nz/models/mg-zs/

another one here

https://www.gwmanz.com/nz/models/suv/haval-jolion/

Lizard1977

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#3209956 23-Mar-2024 20:22

Senecio:

Coming back to the choice of car. The Kia Seltos is a nice car but its in a completely different size class to the Outlander & Tiguan that you were looking at. The Sportage would be a more comparable car within the Kia portfolio. If you were considering the size of the Seltos but wanted to stick with Mitsubishi for the value you could look at the Eclipse Cross or even the ASX.

The Seltos wasn't in the frame for me to begin with. And to be honest, it still isn't really. The specific model I drove had a substantial list of features above and beyond the base model, and I really enjoyed driving it. But I wouldn't pay the price they were asking, or even the price they were offering once we started negotiating.

The comments about the residual finance deal are interesting. I guess if the value of the car after the loan period is substantially higher than the residual, then you can sell/trade-in to cover that difference. But you have to sell or surrender the vehicle to cover that difference. In this case, let's assume a $10k value after 5 years (against a $32k list price at the start of the loan period), for a car that is 10 year's old and 100K kms. Clearing the residual of $7.5k leaves only $2.5k of capital left. Not a great prospect, in my book.

I haven't heard back from the dealer, so haven't had a chance to try out my counter-offer. If he's keen to sell, he knows where to find me. I have other options at this point.

LittleGreyCat

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#3212174 29-Mar-2024 20:41

Late reply on a thread drift topic about VW Touareg.

Occurred to me that the (previous model) VW Amarok is more or less a Touareg in a truck body so there should be a commonality in spare parts.

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