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Car repayments - optional final payment?

  • 28-11-2014 3:57pm
    #1
    veganrun
    Closed Accounts Posts: 1,137 ✭✭✭


    I was looking at a car dealership website and they have some cars on a finance plan that seems reasonable, however there is what they called an "optional final payment". This final payment is few grand so not exactly loose change.

    What are these optional final payments and if they are optional and you decide you don't want to pay it, what happens?


Comments

  • #2
    Aint Eazy Being Cheezy
    Registered Users, Registered Users 2 Posts: 4,634 ✭✭✭Aint Eazy Being Cheezy


    veganrun wrote: »
    I was looking at a car dealership website and they have some cars on a finance plan that seems reasonable, however there is what they called an "optional final payment". This final payment is few grand so not exactly loose change.

    What are these optional final payments and if they are optional and you decide you don't want to pay it, what happens?
    You give the car back.


  • #3
    bazz26
    Registered Users, Registered Users 2 Posts: 51,482 ✭✭✭✭bazz26


    I think they are known as balloon payments. Be careful with these, the market value of the car could be less than the final payment. The other option is to give the car back and walk.


  • #4
    braddun
    Banned (with Prison Access) Posts: 1,221 ✭✭✭braddun


    its there to make your payments seem cheap

    you pay a large sum to bring down your monthly payments


    look at the APR and how much the car costs


  • #5
    mickdw
    Registered Users, Registered Users 2 Posts: 23,795 ✭✭✭✭mickdw


    The options at end of term are

    Pay the optional final payment to take ownership of car
    Or
    Drive it into dealers yard, pay nothing more, hand them the car and keys and walk away.
    Or
    Finance another car on a similar scheme. The idea here is that hopefully the car is worth a few thousand more than the final payment amount. If so, the extra value can go towards a deposit on your next car.

    Handing back and walking away usually costs you money as typically you will be handing back a car worth alittle more than what is owed on it.


  • #6
    coylemj
    Registered Users, Registered Users 2 Posts: 25,705 ✭✭✭✭coylemj


    mickdw wrote: »
    Handing back and walking away usually costs you money as typically you will be handing back a car worth alittle more than what is owed on it.

    +1 Finance packages are put together by accountants who by their nature are conservative types so they will assume the worst case which is that you dump the car on the dealer at the end of the term. That means that when crunching the numbers, they will set the residual value at the end of the term at greater than the market value of the car.

    In plain English: hand the car back and you lose.


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