Balloon Payment on a 991 C2S
Discussion
robrobc said:
I like your man maths 
4 x 15 was always 60 wasn´t it ?
Not if it is compound depreciation of 15%, no. 4 x 15 was always 60 wasn´t it ?
15% pa over 4 years = 58% or thereabouts. So 100k car depreciating 15% pa would be worth just over £52k after 4 years
Back of fag packet guesstimate!
Edited by drmark on Monday 15th July 14:04
Ultimately a 4 year old 997 will be what someone wants to pay for it - and it then depends on the engine size, model, mileage, manual / pdk la la la..
A not bad place to get an idea is a large well known auto trading website - but as with anything, large pinches of salt should be taken as some prices are hope leading to disappointment rather than reality....
A not bad place to get an idea is a large well known auto trading website - but as with anything, large pinches of salt should be taken as some prices are hope leading to disappointment rather than reality....
Zyp said:
£35k seems way to low - I'd say high 40's at least.
What a dealer asking price might be in 4 years is somewhat different to what a finance company will allow for the car being worth, so £35k is probably about right. They will want the balloon to be lower than the trade value so they're not really at risk of losing out if the customer hands them the car back.
thegoose said:
What a dealer asking price might be in 4 years is somewhat different to what a finance company will allow for the car being worth, so £35k is probably about right. They will want the balloon to be lower than the trade value so they're not really at risk of losing out if the customer hands them the car back.
I hadn't read the OP correctly .....mollytherocker said:
I guess this is just about getting the monthly payment down to the lowest possible?
As opposed to actually caring what the future value is?
Ain't that always the way?As opposed to actually caring what the future value is?
And then people go to change cars early and wonder why they have no equity. Depreciation is heavier early on but payments are linear (hence the "GAP") - it's not rocket science but people often think they've been shafted when they have a few grand shortfall to get out of a car early.
Ask them why they didn't sign up for just 2 years if that's how long they wanted the car and they'll tell you the payments were too high...
thegoose said:
Ain't that always the way?
And then people go to change cars early and wonder why they have no equity. Depreciation is heavier early on but payments are linear (hence the "GAP") - it's not rocket science but people often think they've been shafted when they have a few grand shortfall to get out of a car early.
Ask them why they didn't sign up for just 2 years if that's how long they wanted the car and they'll tell you the payments were too high...
Its hard for me to understand why kicking debt into the long grass like this is the best option.And then people go to change cars early and wonder why they have no equity. Depreciation is heavier early on but payments are linear (hence the "GAP") - it's not rocket science but people often think they've been shafted when they have a few grand shortfall to get out of a car early.
Ask them why they didn't sign up for just 2 years if that's how long they wanted the car and they'll tell you the payments were too high...
Is it just because its so easy?
Or is automotive equity just pointless? I own my 3 cars outright and one is only 1 year old. Am I mad?
If you want to minimise the monthly payment then trade the car in at the end of a 3 or 4 year period then a "do it yourself" approach to balloon financing is MUCH cheaper.
If you want to keep the car for four years, then why not take out a ~10 year unsecured loan at a low interest rate. In four years time you might have (for example and to keep the numbers simple) - 60% of the loan principle left, and a car worth 60% of what you paid for it. Then you just sell/trade the car to clear the loan balance and start again, or roll-over into another loan and start again (i.e. take out another loan for the same value, use 60% of the new loan to clear the old loan, then use the 40% remaining plus the p/x value of the car to fully finance your next car). I've been following the same principle for my last 4 or 5 cars, and have always managed to match the car depreciation and the loan payments to within a few % of eachother.
If you want to keep the car for four years, then why not take out a ~10 year unsecured loan at a low interest rate. In four years time you might have (for example and to keep the numbers simple) - 60% of the loan principle left, and a car worth 60% of what you paid for it. Then you just sell/trade the car to clear the loan balance and start again, or roll-over into another loan and start again (i.e. take out another loan for the same value, use 60% of the new loan to clear the old loan, then use the 40% remaining plus the p/x value of the car to fully finance your next car). I've been following the same principle for my last 4 or 5 cars, and have always managed to match the car depreciation and the loan payments to within a few % of eachother.
mollytherocker said:
Or is automotive equity just pointless? I own my 3 cars outright and one is only 1 year old. Am I mad?
Yes, you're mad 
In most cases, owning automotive equity in a depreciating asset (most cars) is silly. You've replaced cash which will either earn money through holding it (or at least hold it's value) with equity in a car that's losing value every single month. You are burning your cash.
As in my previous post above - you should aim to only pay a sum each month equivalent to the cars monthly depreciation, and use a long loan to do this. The aim is never to actually own the car outright, only to make sure that it has a zero impact on your personal balance sheet (i.e. at any point in time the value of your car exactly matches the value of outstanding finance, so at any time you can cash one against the other and have £0 effect on your own wealth). Paying anything higher than the rate of depreciation is just converting your cash (or other potential assets) into something that erodes their value.
rjg18 said:
If you want to minimise the monthly payment then trade the car in at the end of a 3 or 4 year period then a "do it yourself" approach to balloon financing is MUCH cheaper.
Only if you fix the numbers so that they don't reflect reality!!The interest rate charged for credit (APR) is the key.
rjg18 said:
If you want to keep the car for four years, then why not take out a ~10 year unsecured loan at a low interest rate. In four years time you might have (for example and to keep the numbers simple) - 60% of the loan principle left, and a car worth 60% of what you paid for it.
Then you just sell/trade the car to clear the loan balance and start again, or roll-over into another loan and start again (i.e. take out another loan for the same value, use 60% of the new loan to clear the old loan, then use the 40% remaining plus the p/x value of the car to fully finance your next car). I've been following the same principle for my last 4 or 5 cars, and have always managed to match the car depreciation and the loan payments to within a few % of eachother.
Except this is extremely stupid as you would actually have closer to 65-70% of the loan still outstanding (even at low interest rates) and most cars would be worth less than 50% after 4 years, so you have serious negative equity!Then you just sell/trade the car to clear the loan balance and start again, or roll-over into another loan and start again (i.e. take out another loan for the same value, use 60% of the new loan to clear the old loan, then use the 40% remaining plus the p/x value of the car to fully finance your next car). I've been following the same principle for my last 4 or 5 cars, and have always managed to match the car depreciation and the loan payments to within a few % of eachother.
Edited by sidicks on Monday 15th July 23:00
rjg18 said:
mollytherocker said:
Or is automotive equity just pointless? I own my 3 cars outright and one is only 1 year old. Am I mad?
Yes, you're mad In most cases, owning automotive equity in a depreciating asset (most cars) is silly. You've replaced cash which will either earn money through holding it (or at least hold it's value) with equity in a car that's losing value every single month. You are burning your cash.
As in my previous post above - you should aim to only pay a sum each month equivalent to the cars monthly depreciation, and use a long loan to do this. The aim is never to actually own the car outright, only to make sure that it has a zero impact on your personal balance sheet (i.e. at any point in time the value of your car exactly matches the value of outstanding finance, so at any time you can cash one against the other and have £0 effect on your own wealth). Paying anything higher than the rate of depreciation is just converting your cash (or other potential assets) into something that erodes their value.
I have circa 40k tied up in my cars but that 'investment' is fairly stable and as a whole is depreciating pretty slowly.
If I had gone the PCP route I would have nothing and I bet it would have cost a similar amount too!
Surely my position is a healthy one?
mollytherocker said:
Ok, I get your point, but thing is, with PCP you don't just pay the depreciation do you? You pay the interest on the entire cost. And many get suckered by the flat rate too, but that's another thread!
I have circa 40k tied up in my cars but that 'investment' is fairly stable and as a whole is depreciating pretty slowly.
If I had gone the PCP route I would have nothing and I bet it would have cost a similar amount too!
Surely my position is a healthy one?
Yes indeed - while there are arguments for finance rather than outright purchase, owning the car makes most economic sense as you aren't paying finance charges (and profit margins) to a third party and the risk-adjusted return on the cash is almost always lower than the interest charged on the debt.I have circa 40k tied up in my cars but that 'investment' is fairly stable and as a whole is depreciating pretty slowly.
If I had gone the PCP route I would have nothing and I bet it would have cost a similar amount too!
Surely my position is a healthy one?
I have said it many time a pcp is the single most expensive way to run a car.
What it allows is that fixed cost and if people are happy to pay 2.3k a month to run a 991 then it's not an issue.
Paying interest on a very large balloon has always seemed crazy to me.
Even on a 40k car you end up paying 10k interest !
either buy it and own it or take out a 5 year loan and pcp it your self.
If neither of those work for you, you have champagne taste but only have lemonade money and will always be stuck at a price point and a slave to finance.
What it allows is that fixed cost and if people are happy to pay 2.3k a month to run a 991 then it's not an issue.
Paying interest on a very large balloon has always seemed crazy to me.
Even on a 40k car you end up paying 10k interest !
either buy it and own it or take out a 5 year loan and pcp it your self.
If neither of those work for you, you have champagne taste but only have lemonade money and will always be stuck at a price point and a slave to finance.
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