Lease vs Installments vs Cash Buy

[Waseem 333i]

Buy a townhouse, retains value and is likely to appreciate should you wish to sell in the future.. rent it out and get to collect monthly rentals! Which can then be used towards car repayments...

A bit off topic, but that's my 2c..

There are other factors regarding this.

If you take R600k and invest into a property (not taking into account costs to purchase) rule of thumb you can rent it out for R6000 per month. Then minus rates and taxes, levies, agents comm. You should come out with R4500 depending on costs. Then you can have maintenance issues or special levies.

Effectively you could afford a car with R4500 monthly installments.

I would chose to buy property and use the rental to purchase a car. If I get R4500 in my pocket from rental I would buy a car which would be R4000 a month and would accumulate the R500 in a account that would bring returns but still give me access to it when needed.

Unfortunately it wont be a R600k dream car.

 

[Gbmw]

lotta strippers and narcotics........jokes....jokes

 

[Bmw.wp]

Thanks Guys.

Much appreciated. raise:

 

[JohnLod]

Hi,
here is my 2 cents worth, the purchase is based on what is important to you. Most cases if our clients by cash, sometimes 7 digits (it does get reported as per SARS LAW), then then it is as a result that the client already has other investments which is generating enough income to be able to by cash. In some cases it is more important for a individual to have a nice car, each to his own. Me personally I buy property, this gives me additional income which allows me to by a new/demo vehicle from time to time. Also when I need cash quickly I can access it through my bonds and top it up again. I don't pay off by bonds for tax purposes as the interest a expense which is deductible due to the fact that I rent out some of the properties and I do declare the rental as a income.
Prime -5%, THINK ABOUT IT. Nothing is for free or as it seems. So happens on another brand the price of the vehicle went up just prior to a vehicle -5% special, think about it. Prime is the prime lending rate which is close to the repo rate, so that difference needs to come from somewhere.
Cash is king but spend it wisely, you need a place to stay, but there are different ways to get around.

That is my opinion.

 

[TurboLlew]

Just a reminder that property is not for everyone. Something I see with some staff and colleagues is that they are buying their first properties at what I believe are unrealistic prices from a growth perspective. Days of making huge amounts over short periods are over for the most part unless you are in some very specific areas... They are also being hit with extremely high levies (even I am) which coupled with other overheads (rates, water, lights) make a BIG dent. Bigger than many of those who bought pre-2004/5 probably realise.

On a R1.8mil property you can spend 4K (5K+ with special levies and depending on your usages) over your bond for this, which isn't all recouped from rental income. I see many properties advertised around me for 17-18K rental which is nice at the face of it. However, my view based on total costs, is that unless the owner has bought that cash or there is a tiny bond, there is no way they are making any real money... R1.8 mil tied up and you are getting R5K after tax if you are lucky. Best case scenario, you are making R8K/month off 1.8mil which is under 6%. R1.8M in some of the funds out there (Certainly the ones requiring R1M+ capital) will get you well over double that return... so would many business ventures...

But this is a market for rental I hear you say! People can't get bonds! So you want those people who can't get bonds to pay nearly that amount renting your property?? You also have the additional risk of repairs and tenants who decide whether they want to pay or not (or as was done to me, have the copper and fixtures neatly stripped out prior to their departure?), not to mention agents commission if you go that route which eats into that further.

Different story if you bought at a different time or your circumstances are different... just saying that I hear this alot (buy property instead) but you have to be sure that this is going to work for you. Bond is a great way to finance things though as John points out and property is an essential part of a good investment mix, but don't let it be the only thing you fixate on.

Things don't always need to be logical or justified... if you have a couple of properties and good investments, just go and buy whatever you want. You are already better equipped to deal with life than 99% of the world LOL

---

Prime -5%, THINK ABOUT IT. Nothing is for free or as it seems. So happens on another brand the price of the vehicle went up just prior to a vehicle -5% special, think about it.

:clapper:

---

Buy a townhouse, retains value and is likely to appreciate should you wish to sell in the future.. rent it out and get to collect monthly rentals! Which can then be used towards car repayments...

A bit off topic, but that's my 2c..

There are other factors regarding this.

If you take R600k and invest into a property (not taking into account costs to purchase) rule of thumb you can rent it out for R6000 per month. Then minus rates and taxes, levies, agents comm. You should come out with R4500 depending on costs. Then you can have maintenance issues or special levies.

Effectively you could afford a car with R4500 monthly installments.

I would chose to buy property and use the rental to purchase a car. If I get R4500 in my pocket from rental I would buy a car which would be R4000 a month and would accumulate the R500 in a account that would bring returns but still give me access to it when needed.

Unfortunately it wont be a R600k dream car.

Not depending on your tax bracket... and if you had R600K lying around spare, then you would be in the top one... You still have to pay tax and they are getting ever more efficient at finding these things out. If a special levy is declared (happening often in our group of friends), the model becomes worse. You will come out with closer to a 5% return. I do hear that the car is depreciating and the property is paying for itself (slowly) but then why go with property and not invest the 600K elsewhere with far higher than a 5% return

The cost of acquiring the car (new anyway) is in and of itself a rapidly moving target as well in our market... so you could at the end of the day end up acquiring sufficient funds to buy the car but it might now cost double the price or you would have to settle for a used one...

In practice, it is also not as easy to use rental income to justify affordability for a car/house as it is with a salary/other regular income so even if it is approved you will pay the price in interest rate as well...

 

[maleven-GP]

@Llew I suppose one needs to buy right.. the higher the purchase price the higher the expected rental, however in that bracket there are few people that can afford the rental.. which means the property may be unoccupied for lengthy periods.. I bought a 3 beds in Norkem park for R600k, I'm currently receiving R7500 after agent commission. It covers bond, levies, rates and taxes.. I don't have profit on it yet, but the tenant is servicing the bond... if it was paid up I'd be getting R 6000 clean on it..

 

[TurboLlew]

@Llew I suppose one needs to buy right.. the higher the purchase price the higher the expected rental, however in that bracket there are few people that can afford the rental.. which means the property may be unoccupied for lengthy periods.. I bought a 3 beds in Norkem park for R600k, I'm currently receiving R7500 after agent commission. It covers bond, levies, rates and taxes.. I don't have profit on it yet, but the tenant is servicing the bond... if it was paid up I'd be getting R 6000 clean on it..

That's the trick... except most folks seem to think that buying property by-default is "buying right" which is not always the case.

 

[ASH]

Sorry to the OP for going off topic here.......but I had to correct............

Hi Pho3niX90

After reading your post, I think this is how people are getting caught out with the GFV deals being offered, maybe the sales staff or F&I at the dealership make the deals sound good without fully explaining all the conditions.

Essentially at the end of the 4 years, you will have 3 options:-

1. return the vehicle to the dealer and walk away
2. return the vehicle and take a new one, can use additional value over GFV as deposit
3. should you wish to keep the vehicle, that 46% GFV is the value of the amount you will probably still owe the bank after 4 years of payments..........it is an amount which is excluded from your finance contract, but becomes payable at the end of term should you wish to keep the vehicle. The GFV value is deducted from the loan amount therefore a lower value installment is offered, however the GFV
is still due by the purchaser at the end of the repayment period if ownership is intended. Imho opinion it is a clever way of disguising or rewording a residual value.

These deals are structured to make owning a new vehicle more affordable, but there are conditions which such as limitations on mileage, wear and tear clauses, condition of vehicle on return, all of which the purchaser can be held liable for, I've read some purchasers have been charged up to R4 per excess KM travelled, and any paintwork, dents and repairs are for the purchasers account should the vehicle be returned at the end of term.

If you are not aware of this, then the dealership has not explained all the conditions to you.

Cash in most instances.

HOWEVER, there are instances where this is not the best.

Here is a example:
I am currently buying a ford pickup. Cash price 567930 with extras, however on ford financing I get a fixed 7.99% interest rate, a guaranteed future value of 46% (4 years from now), a 60K deposit, payment is made also over 48 months. BUT, I get a discounted price as well. Monthly installment 7500 which equates to 439200K paid back (with interest), and there is no residual.

So in a nutshell, options on each individual should be considered as this is per person basis. So If I were to sell said vehicle back to them in 4 yrs, my total expenditure would be (439K - 260K = 179K).

If I with another financing company (ABSA, WESBANK etc) though, total paid back would have been around (790K).

 

[Pho3niX90]

Sorry to the OP for going off topic here.......but I had to correct............

Hi Pho3niX90

After reading your post, I think this is how people are getting caught out with the GFV deals being offered, maybe the sales staff or F&I at the dealership make the deals sound good without fully explaining all the conditions.

Essentially at the end of the 4 years, you will have 3 options:-

1. return the vehicle to the dealer and walk away
2. return the vehicle and take a new one, can use additional value over GFV as deposit
3. should you wish to keep the vehicle, that 46% GFV is the value of the amount you will probably still owe the bank after 4 years of payments..........it is an amount which is excluded from your finance contract, but becomes payable at the end of term should you wish to keep the vehicle. The GFV value is deducted from the loan amount therefore a lower value installment is offered, however the GFV
is still due by the purchaser at the end of the repayment period. Imho opinion it is a clever way of disguising or rewording a residual value.

These deals are structured to make owning a new vehicle more affordable, but there are conditions which such as limitations on mileage, wear and tear clauses, condition of vehicle on return, all of which the purchaser can be held liable for, I've read some purchasers have been charged up to R4 per excess KM travelled, and any paintwork, dents and repairs are for the purchasers account should the vehicle be returned at the end of term.

Cash in most instances.

HOWEVER, there are instances where this is not the best.

Here is a example:
I am currently buying a ford pickup. Cash price 567930 with extras, however on ford financing I get a fixed 7.99% interest rate, a guaranteed future value of 46% (4 years from now), a 60K deposit, payment is made also over 48 months. BUT, I get a discounted price as well. Monthly installment 7500 which equates to 439200K paid back (with interest), and there is no residual.

So in a nutshell, options on each individual should be considered as this is per person basis. So If I were to sell said vehicle back to them in 4 yrs, my total expenditure would be (439K - 260K = 179K).

If I with another financing company (ABSA, WESBANK etc) though, total paid back would have been around (790K).

Hi.

This is what I though as well, I had my banker look at the deal as well for safety.

The catch with the GFV is that you cannot do more than 20K kms a year, or if you really do not drive that much you can go for a higher GFV if you do not drive more than 10K kms a year.

There is no residual amount whatsoever, there is an option to upgrade withing 3.5 and 4 year which is where the GFV comes into play (probably to keep customer retention high), there is no option just to return it unless you are selling it. Term is only 48Months, but last installment is the same as first installment.
I made properly sure of the above to avoid any fine printing. In the end it seems this deal was structured with this big discount to get rid of 2016 built stock for the new 2017 stock, as this deal was only valid for stock they had on the floor.

Sent from my SM-N930F using Tapatalk

 

[ASH]

Sure, but make sure or check with the finance company (Ford Credit?) how does ownership pass to you at the end of the 4 years, just to be safe.

:coolShake:

Sorry to the OP for going off topic here.......but I had to correct............

Hi Pho3niX90

After reading your post, I think this is how people are getting caught out with the GFV deals being offered, maybe the sales staff or F&I at the dealership make the deals sound good without fully explaining all the conditions.

Essentially at the end of the 4 years, you will have 3 options:-

1. return the vehicle to the dealer and walk away
2. return the vehicle and take a new one, can use additional value over GFV as deposit
3. should you wish to keep the vehicle, that 46% GFV is the value of the amount you will probably still owe the bank after 4 years of payments..........it is an amount which is excluded from your finance contract, but becomes payable at the end of term should you wish to keep the vehicle. The GFV value is deducted from the loan amount therefore a lower value installment is offered, however the GFV
is still due by the purchaser at the end of the repayment period. Imho opinion it is a clever way of disguising or rewording a residual value.

These deals are structured to make owning a new vehicle more affordable, but there are conditions which such as limitations on mileage, wear and tear clauses, condition of vehicle on return, all of which the purchaser can be held liable for, I've read some purchasers have been charged up to R4 per excess KM travelled, and any paintwork, dents and repairs are for the purchasers account should the vehicle be returned at the end of term.

Cash in most instances.

HOWEVER, there are instances where this is not the best.

Here is a example:
I am currently buying a ford pickup. Cash price 567930 with extras, however on ford financing I get a fixed 7.99% interest rate, a guaranteed future value of 46% (4 years from now), a 60K deposit, payment is made also over 48 months. BUT, I get a discounted price as well. Monthly installment 7500 which equates to 439200K paid back (with interest), and there is no residual.

So in a nutshell, options on each individual should be considered as this is per person basis. So If I were to sell said vehicle back to them in 4 yrs, my total expenditure would be (439K - 260K = 179K).

If I with another financing company (ABSA, WESBANK etc) though, total paid back would have been around (790K).

Hi.

This is what I though as well, I had my banker look at the deal as well for safety.

The catch with the GFV is that you cannot do more than 20K kms a year, or if you really do not drive that much you can go for a higher GFV if you do not drive more than 10K kms a year.

There is no residual amount whatsoever, there is an option to upgrade withing 3.5 and 4 year which is where the GFV comes into play (probably to keep customer retention high), there is no option just to return it unless you are selling it. Term is only 48Months, but last installment is the same as first installment.
I made properly sure of the above to avoid any fine printing. In the end it seems this deal was structured with this big discount to get rid of 2016 built stock for the new 2017 stock, as this deal was only valid for stock they had on the floor.

Sent from my SM-N930F using Tapatalk

 

[TurboLlew]

So Pho3niX90 I think I am missing something:

You are buying a vehicle currently worth R567930... financing over 48 months and your total paid back is going to be R439200.

Do you have a commitment from them to buy back the vehicle from you at a price of R260K at that point. What if they don't want to take it back? Is that documented somewhere and is it specific to one dealer or any ford dealer?

or

do you just hand them the keys and walk away provided you have kept your end up in terms of mileage and condition (this is how it works at other places)?

If you wanted to take ownership of the vehicle you would have to pay in 260K odd... making the total cost of this exercise still better (based on interest rate) than ABSA/Wesbank...

On the other point,
Extra cost per km on a 320i F30 brand new right now is R5/km out of contract...so choosing the right mileage is crucial.

 

[Pho3niX90]

So Pho3niX90 I think I am missing something:

You are buying a vehicle currently worth R567930... financing over 48 months and your total paid back is going to be R439200.

Do you have a commitment from them to buy back the vehicle from you at a price of R260K at that point. What if they don't want to take it back? Is that documented somewhere and is it specific to one dealer or any ford dealer?

or

do you just hand them the keys and walk away provided you have kept your end up in terms of mileage and condition (this is how it works at other places)?

If you wanted to take ownership of the vehicle you would have to pay in 260K odd... making the total cost of this exercise still better (based on interest rate) than ABSA/Wesbank...

On the other point,
Extra cost per km on a 320i F30 brand new right now is R5/km out of contract...so choosing the right mileage is crucial.

Yes the future value is guaranteed, however seeing what they go for secondhand they are still making something from buying back at a lower value if you choose to trade in.
They do not have the choice to take it back, it's up to the purchaser what they decide to do, this option is available from any ford dealer however only via the FORD option which is technically absa financing. There is no residual on the term, in fact they gave me 2 options. 1 is the one I described the other is with a 30% residual over 71 months and month 72 would be 30% payment. That however is at a 10.5 rate via normal financing at a monthly payment of R6500. I opted for the ford financing.

The only killer with ford option is that there is a max KM limit per year, if you go over the GFV is waived, you cannot pay more than your installment a month, and you cannot give a higher deposit than 10%, and must be over 48 months, you can only trade in (if you so choose) between 3.5 and 4yrs.

I have actually read a lot about these deals on other forums, more recently on the 4x4 community where it seems a lot of people are going this route, give 3 months notice of settlement and get away with a bargain. It also seems that this is not limited to ford financing but most dealerships. Like I said before, I think this is a strategy to keep customers loyal to the brand, and getting rid of old stock. At the end they are still making a huge profit.

 

[Stig24]

I think in terms of value lost in let's say 5 years, you will lose less if you paid cash. Because with leasing your also losing the interest. Just my 2c