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

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!

[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.