Golf finance info

[Allegiance]

Hi Guys,

Not sure if this is exactly the right section to post this but since it relates to buying a GTI I figured what the hell :P

For my current car the I will want to trade in, I have an un-secured personal loan. The reason I went for an un-secured personal loan at the time was because I was consolidating a credit card onto the loan so that way just made more sense.

I still have money owing on the loan, and it will probably be more than what I will get on my trade in.

Now I am wondering how this works? (Obviously this varies between banks etc)

I will give some example figures (these are just example and don't pertain to my situation):

If for example I owed $15,000 on my current loan, and the dealer gave me $10,000 for my existing car. However assuming I was able to negotiate a 10% additional discount off the new car which equals to $4,500.

Does this mean the dealer would give me a cheque for $10,000 for the trade in and I would have to sort out the remaining $5,000 on my loan?

Does the additional $4,500 discount get taken from my purchase price of the new car or can I sort of combine this with the trade in to get a cheque for $14,500?

I hope all that made sense! You’re going to have to ignore my ignorance as this will be only my second new car, and the trade in towards my first car was fully paid up.

Thanks! :confused:

[elisiX]

You want to finance (in your example) a $4500 shortfall on a depreciating asset? What do you think will happen when it comes time to sell the new car (assuming) within 3-4 years? A bigger hole. If you dont have the cash to pay out the balance of the existing loan, you may not be able to afford a new car as financing the shortfall is not smart. However seeing as its an unsecured loan, you can do as you like (ie you are not forced to pay out the loan). On a $40k vehicle, I would also hazard a guess that the finance company (secured loan or not) might not allow you to finance the shortfall anyway. Ultimately, these are questions you need to ask your financial institution as only they can speak specifically to their policies.

[Allegiance]

You want to finance (in your example) a $4500 shortfall on a depreciating asset? What do you think will happen when it comes time to sell the new car (assuming) within 3-4 years? A bigger hole. If you dont have the cash to pay out the balance of the existing loan, you may not be able to afford a new car as financing the shortfall is not smart. However seeing as its an unsecured loan, you can do as you like (ie you are not forced to pay out the loan). On a $40k vehicle, I would also hazard a guess that the finance company (secured loan or not) might not allow you to finance the shortfall anyway. Ultimately, these are questions you need to ask your financial institution as only they can speak specifically to their policies.

Thanks for your response, however I was more looking for information as to how this works with the dealer rather than my finance company.

Thanks

[elisiX]

Well the dealer can write you up a cheque for the trade in, which you can pay to your finance company. However the cheque will be for the trade in amount, not the loan payout.

Your asking if the dealer will write you a cheque for the trade in value, plus the 'discount' value so you can then payout your loan and finance the full new vehicle price before discount?

That isn't going to happen. You need to payout as much of your loan as possible with the cheque from the trade in and refinance your loan balance (to a smaller loan) and reduce your repayments.

(assuming this is all about managing your outgoings)

[team_v]

Your asking the dealer to write you a cheque for the trade in value, plus the 'discount' value so you can then finance the original price? That isn't going to happen I wouldn't think.

Agree.

Never going to happen as the discount is off the RRP of the vehicle, it isn't a cash bonus to you.

[Timmy10]

Why dont you negotiate with the dealer.

For example he is giving you $10k for trade in, an $4500 off from the car (ie savings on dealer delivery, on roads, half price sun roof etc).

Tell him to add the $4500 price to the car (ie keep the costs on it) but give you a higher trade in.

[elisiX]

Technically they could dodgy it up by giving you a larger trade in value but no discount to even it out on paper.

However I wouldn't think lieing to the financier who is going to be using the goods as guarantee against the loan would be happy if they found out.

A loan with an over market value trade in and zero discount on the vehicle might raise a few questions.

[Allegiance]

Thanks for your help and responses, much appreciated.

[yas786]

I am of the understanding that a dealer pays GST on a trade. Therefore its in their best interest to pay the smallest amount on a trade to reduce the GST liability. I will stand corrected if I'm mistaken.

Yas

[gerhard]

Dealers increase the price of trades to cover finance shortfalls on a daily basis, then sell the next car at the inflated price.

This is good for dealers because they get the sale, it's good for the Motor registries because they get more stamp duty, it's good for the financier of the traded vehicle because they get their money.

When there are so many good things with a scam, there has to be a downside - and there is.

The person for whom all this game-playing is being carried out is the loser, because - they couldn't afford the car they are trading in, and they can even less afford the car they are buying now. As mentioned by ElisiX, what happens at the next changeover - the shortfall gets bigger

I know a lot of people play this game, but it does not sit well with my view of financial stability. But then I like to own things and owe nothing, whereas others like to own nothing and owe their whole life to the finance institution.

[elisiX]

gerhard said what I was eluding to perfectly.

If you really have no option, get a $5k low interest credit union loan with fixed payments over 3 years and pay it off in 12 months.

[SpeedBird]

I know a lot of people play this game, but it does not sit well with my view of financial stability. But then I like to own things and owe nothing, whereas others like to own nothing and owe their whole life to the finance institution.

Well said, At the end of the day Ca$h is still KING! when buying any car.

[team_v]

Well said, At the end of the day Ca$h is still KING! when buying any car.

Actualy, it isn't.

I spoke to a dealer and asked how much of a discount i could get if i paid in cash and he said he could knock $100 off the price for me.

They get more money from the financing and interest than they do for cash so there is no real benefit to them to do a deal for cash.

[gerhard]

Actualy, it isn't.

I spoke to a dealer and asked how much of a discount i could get if i paid in cash and he said he could knock $100 off the price for me.

They get more money from the financing and interest than they do for cash so there is no real benefit to them to do a deal for cash.

Hell, yeah - there's a valid reason to get into debt. :brutal:

[Allegiance]

Hell, yeah - there's a valid reason to get into debt. :brutal:

The GTI is worth it :banana:

[STV4SYT]

No car is worth getting into debt over.

Sounds like you will be entering a black hole of repayments for the next 3 years.

What happens when you want to change again in 2 years.

Why not buy a 2nd hand Mk5 if thats what you can afford to??

[gerhard]

The GTI is worth it :banana:

No, it isn't - the GTI is just a car when you boil it all down.

Debt is a disease

Loans for housing are the only sensible loans, but even these are insane nowadays because people have forgotten the concept of a healthy deposit.

I suppose the thinking is "I can't afford to repay $X,000, so I might as well borrow $4X,000"

[elisiX]

I have no issues with financing a vehicle - that's not the point of my comments.

I just feel that if you are already upside down on a loan, putting that negative into a vehicle is a very bad idea as it will only accumulate.

I'm going to be financing my GTI or R.. but no more than 90% of the purchase price to give myself a little head start.

[Allegiance]

Actually the way it has ended up with discounts and the way I am going to be doing the loan means the loan amount will be for the retail price of the car.

So in terms of the loan it's as if I purchased the car without a discount. The final loan price won't be greater than the value of the car.

Also my new loan will be at 7.46% P.A. whereas my last unsecured loan was 15.7% P.A so it works out alot better.

[elisiX]

Yes mate but your paying full retail on a car which is going to start depreciating from the regular discounted price on the market (even less than that even).

Therefore you are left with a significant shortfall. Unless you pay over the minimum for the car repayments, its going to be painful come resale.

To lay this out; All assumptions.

$50,000 car loan (inc $5k 'discount')

Car begins to depreciate from $45k.

Resale time and the car is worth $30k but you still owe $35k-$40k.

[gerhard]

Yep, on a $50,000 car fully financed you are financing the Dealer Delivery $3000, the GST $4500, the dealer profit margin $3000, the registration, and the stamp duty.

A $35,000 "asset" financed happily at $50,000.

I can't get my head around that at all.......

[SpeedBird]

Yep, on a $50,000 car fully financed you are financing the Dealer Delivery $3000, the GST $4500, the dealer profit margin $3000, the registration, and the stamp duty.

A $35,000 "asset" financed happily at $50,000.

I can't get my head around that at all.......

Me too, Well said again gerhard, At the end of the day Ca$h is still KING! when buying any car and new especially.

" What the fool does in the end, the wise do in the begining! "

[flappa]

Makes no sense at all to purchase a brand new car with cash or in fact expensive personal finance. The moment you drive out the door your are usually $5k in the hole already and loosing money rapidly. The exception would be for business purposes.

Business or a Salary Sacrifice are the only real sensible ways to purchase a new vehicle.

Of course, if you are cashed up . . . . your money your choice.

[Brendan_A]

Makes no sense at all to purchase a brand new car with cash or in fact expensive personal finance. The moment you drive out the door your are usually $5k in the hole already and loosing money rapidly. The exception would be for business purposes.

Business or a Salary Sacrifice are the only real sensible ways to purchase a new vehicle.

Of course, if you are cashed up . . . . your money your choice.

Makes no sense what you have just said either. Cause I'm going to borrow $10k on a $38k car it's not sensible???

[flappa]

Whats so hard to understand ?

Paying Interest on a loan for a depreciating asset is never sensible.

Different when you can write off the difference on tax.

If someone chooses to purchase a brand new vehicle with cash or 100% finance, thats their decision . . . . your money your choice.

Is it sensible ? Not one bit.

[Brendan_A]

I bet more than half the people on this forum owe money a car. If you don't care what people do with there money why did you put your 2 cents worth on this thread?

[flappa]

As do I. In fact I was MUCH worse, because I used my housing loan to purchase a vehicle, because it was a vehicle I REALLY wanted.

I'm paying off a vehicle over 30 years . . . go figure :emo_baghead:

The point I was making was in reference to the OP. This person not only had an outstanding amount on an existing loan but was considering purchasing a new vehicle at 100% finance and thus digging themself a bigger hole on a depreciating asset. Is that really smart ?

Just consider why you are doing it or would a slightly older vehicle do the same job ?

[Brendan_A]

Yeah your right there mate. Not a wise move! I though you were saying all people borrowing money on a new car are silly. Sorry mate.

[flappa]

and my apologies.

Need to make sure my posts are clear in their intent.

[STV4SYT]

If someone chooses to purchase a brand new vehicle with cash or 100% finance, thats their decision . . . . your money your choice.

Is it sensible ? Not one bit.

Nothing wrong with Cash, im 32, and have never paid a cent of finance ever in my life, ive just bought my 2nd ever new car, had a new Motorcycle a few years back also but that wasnt the same amount of $$ as a car.

Have i driven some nasty cars in my time? you bet, but i bought what i could afford at the time, paid for them all in full, drove them til i could afford something better then changed it and gradually got to a stage where i can change my car every 2 years into another new one for not an extreme amount of money.

It did take me a few steps to get there, but id rather throw money into savings for the next one than be forced to pay $x a week for a car that to be honest is not essential.

I also use the car a bit for work and can still get a reasonable amount back in tax each year for usage.