I know this is sorta off-topic but, my friend is looking into purchasing a car now. I suggested the SRT-4 but he said it has to be european or japanese otherwise he can't get it. Because his bank will give him a special financing deal on a euro/jap car since it will have a higher resale value. He's looking to spend about, 40,000$ (canadian) so like, 28,000$ usd. Perhaps a little more, like up to 30,000$. Anyway, I'm asking you guys because you always give good advice hehe. He basically wants overall quality, and good speed like, 5.5 seconds to 60 and a good top end like 145-160mph. So what is the best japanese model out there right now in that price range? How about euro? (SRT-4's rock!)

 

Closest thing is a Subaru WRX, but it may be a little more than he wants to pay...it's kinda ugly though....never heard of financing terms like that before.....[:'(]

 

Well the finance system is neat. It's beneficial for the bank and for the buyer. It works like this: Basically you choose a vehicle that the bank believes will have a good re-sale value. Let's say a $30,000 car. If the re-sale value is estimated to be $12,000 then the ammount you finance would be something like $20,000. The bank will shave off most of the re-sale value from your total vehicle price. Why? Well I'll tell you. let's say they take 9,000$ of that re-sale estimate and say "Okay, we'll take 9,000$ off the price of that car so it's only $21,000. This is the ammount that you will finance for 5 years." That 5 year finance term would have a high interest rate, like 10%, however your monthly would still be much lower than if you were financing the full $30,000. Where does the bank make proffit? Well in the first 5 years, you finance that $21,000 at 10% on a 5 year term. That'd be $385 a month. At the end of this 5 year period, you will have payed 23,100. Bank already makes $2,100. Here's the punch for them now. At the end of that 5 year term, you either have to pay them that entire resale value of $12,000, or hand over the car so they can sell it themselves. If you pay the 12,000$ up front in total, or hand over the car and they sell it for 12k, then they make another 3000$ in proffit. Remember, they only took $9000 off your total vehicle price for your 5 year finance, but are charging you the full re-sale value at the end of your 5 year term. In total this grants them $5,100 of proffit (quite good..) That's about 17% proffit (more than the government makes). There is also one other option at the end of that first 5 year term. When they charge you the re-sale of $12,000, you have the option to once again, re-finance that, for 5 more years or whatever term you choose, once again, at a high interest rate like 10% maybe more maybe a little less. So imagine, 60months. That's 220$ a month. At the end of that five year term they've collected a total of $6300 worth of proffit. That's more than 20% proffit!

It is a brilliant plan. It allows the buyer to keep low monthly payments, and the bank to have constant cashflow and excellent proffit. You end up paying a lot more for your car yet it is infinitely more manageable. I hope that was clear enough [sm=smiley36.gif][sm=smiley5.gif][sm=smiley17.gif] hehe. !

 

Sounds more like a type of lease rather than a "buying" plan...especially the "refinancing" part....I'd let a lawyer look it over before signing...10 years is a long time to be paying on a new car.....heck, it could be a "clunker" by the time you really own it...proceed with caution

 

Yeah dude- that's a lease. All the numbers work out exactly the same. Also, watch out for big deposits required at purchase.

 

The plan is not a lease, since you get full ownership. It is like taking out a loan from the bank. And the dealership has nothing to do with it. As far as the dealers are concerned, the car has been payed for in full. It's the bank that you deal with. No deposit is required really. They suggest about 2000 but it isn't required. It's a very open deal, I've looked in to it. They of course, make a lot of money on it, but I don't mind paying more when it makes it easier for me to afford something =P. It may sound like a lease, but it's a bit different. Different because you own the car. You get the slip and everything. But you owe the bank money. Basically you go into a convenient credit debt.

 

Not to be argumentative, but a lease is the same thing- dealer's don't have anything to do with a lease, either- they're financed by banks as well, whether it's Chrysler Finance or Bank of America or whatever. When you buy the car the dealer gets paid and the bank holds the lease.
You don't get ownership according to what you said- you either have to pay the balance ("resale value", I think you said) or give them the car- same as a lease.
And don't be fooled- you will NOT get the title to the car while someone else holds the note- if they hold the note they will hold the title for collateral.
Doesn't really matter what you call it though- if it works for you, great.

 

Yeah in America that's a lease. It's not a bad deal if you don't mind giving up the car at the end of the term. You pay less for the car and don't have to worry about selling it after the lease is up. You owe nothing in the end and can start all over. There are some catches though. Sometimes after the term is up the car is inspected regardless of what the pre-determined re-sale value was. Normal wear and tear is fine but if there is considerable damage you will pay extra for them just to take it off your hands. I am in a lease now and I pay much less than what I would be paying if I just outright bought it. Thing is though now if I want to buy out of the lease I will be paying much more than what the total left to pay on the lease is. I would also be upside down if I did decide to buy out. Leases are best if you put some down and only do it for 3 years or less. A 5 year term is pretty long for a lease and if you add it up you would be better off just buying and having a higher monthly payment if you decide you want to keep the car longer than the term. Oh yeah, I recommend an evo rs for that much money. Good bang for the buck.

 

I would tell your friend to take a less bank friendly approach and get the SRT-4 anyway. So they give him a deal that isn't as good, but the car is cheaper than the others to begin with, so it evens out.

 

Also, I forgot- remember that in order to make that projected value stick, in addition to what byebye said, you can only drive a certain number of miles per year- any more than that, and obviously the car won't be worth as much, and you end up paying money.