Driver stuck with vehicle / loan?

[flashbang]

This is why MAS put in 40% DP rule...

[ALTK]

Maybe...let friend or relative use the car and bare the monthly installment but insurance must be covered.

[Freeder]

Hi guys,

 

have got a theoretical scenario which i've recently heard of someone being in - it's not anyone i know, so purely academic purposes, and seeing if anyone has any ideas.

 

So car owner currently has a vehicle, with a 50k car loan left. Take for example he's paying 1K a month. He feels that he can't afford to pay this monthly installment now, and wants to reduce the amount he pays monthly. Repricing is out of the question, as the market is homogeneous.

 

He inquires as to the price he can sell the car at. Unfortunately, it fetches a bid of say ... 25K. He doesn't have sufficient cash to cover the additional 25K, even after selling the car. However he doesn't mind paying off the 25K in (lower) monthly instalments.

 

What are the options open to him in this case? I know that taking a personal loan - assuming his income can support - is one option.

Wat car is your frd driving right now?

[Evillusion]

He have to call his finance company and explain to them that he cant afford the installment and has found a buyer who is only willing to take in at 25k. Propose to the bank the amount and no. Of instalments he will pay to the finance company after he sell of his car. Eg: outstanding loan =25k. Propose to pay 500/mth X 50months

I have done that many yrs ago. Afterthat, i decided to only buy without loans

ah...you followed someone's 'good' advice......our dear good friend actually.....

[Victor68]

This is why MAS put in 40% DP rule...

but 40% include COE leh. so mathematically, still can happen. haha

[Heartlander]

1) Sell the car to minimise loss. Sell direct instead of through a dealer may help.

2) Consider loan refinancing espevially if the current intetest rates are high

3) Consider doing grabhitch.

4) lease out the car in open market, eg sgcarmart.

 

There might be legal concern but when so desperate already....

[Cokiee]

He have to call his finance company and explain to them that he cant afford the installment and has found a buyer who is only willing to take in at 25k. Propose to the bank the amount and no. Of instalments he will pay to the finance company after he sell of his car. Eg: outstanding loan =25k. Propose to pay 500/mth X 50months

I have done that many yrs ago. Afterthat, i decided to only buy without loans

Didn't know restructuring could be done for vehicle loans as well. Maybe one of the debt consolidation products could be the solution. Thanks!

I might be wrong, but I think this scenario is unlikely to occur in the first place. The equity of the car is unlike to fall so much faster than the loan balance.

 

Unless loan quantum at or above 100% at very high interest rates, matched with a car that has really awful resale value.

Actually, it is possible, and in this case the guy kena (unfortunately). It's a bit like the mortgage crisis in the past where one sits on negative equity I suppose, possibly because of very low demand for the car type.

[Philipkee]

Didn't know restructuring could be done for vehicle loans as well. Maybe one of the debt consolidation products could be the solution. Thanks!

Actually, it is possible, and in this case the guy kena (unfortunately). It's a bit like the mortgage crisis in the past where one sits on negative equity I suppose, possibly because of very low demand for the car type.

May I know the car type? Cos in one thread you have been talking about manual transmission.

 

When I got my car my SE also warn me MT low resale value.

 

So I am just wondering if it is a manual car.

[Toeknee_33]

Actually, it is possible, and in this case the guy kena (unfortunately). It's a bit like the mortgage crisis in the past where one sits on negative equity I suppose, possibly because of very low demand for the car type.

 

Say this example:

 

Car

​Price: $100k

OMV: $15k

Scrap Value: $7.5k

Annual Depre: $9.25k

 

Loan

Amt: $70k (70% loan)

Interest: 3%pa

Tenure: 7 years

Interest Amt: $14.7k

Total: $84.7k

Installment: $1,008/mth (close to TS's scenario)

 

After 30 months (Balance life of car = 7.5 years)

Following Rule 78, the full settlement amt is $48.3k (close to TS's scenario)

 

Resale value of car:

At 5k/yr = (7.5 yrs x 5k) + 7.5k = $45k

At 5.5k/yr = (7.5 yrs x 5.5k) + 7.5k = $48.75k

At 6k/yr = (7.5 yrs x 6k) + 7.5k = $52.5k

At 7k/yr = (7.5 yrs x 7k) + 7.5k = $60k

 

At abysmal resale value of $5.5k/yr, already can break even. 

Edited October 10, 2017 by Toeknee_33

[Cokiee]

May I know the car type? Cos in one thread you have been talking about manual transmission.

 

When I got my car my SE also warn me MT low resale value.

 

So I am just wondering if it is a manual car.

Yup it's a manual. Actually the car I'm looking to buy, seems like the owner is kinda stuck. He's been offered a price a fair bit lower than what his loan amount is, and my offer is already higher than that.

Say this example:

 

Car

âPrice: $100k

OMV: $15k

Scrap Value: $7.5k

Annual Depre: $9.25k

 

Loan

Amt: $70k (70% loan)

Interest: 3%pa

Tenure: 7 years

Interest Amt: $14.7k

Total: $84.7k

Installment: $1,008/mth (close to TS's scenario)

 

After 30 months (Balance life of car = 7.5 years)

Following Rule 78, the full settlement amt is $48.3k (close to TS's scenario)

 

Resale value of car:

At 5k/yr = (7.5 yrs x 5k) + 7.5k = $45k

At 5.5k/yr = (7.5 yrs x 5.5k) + 7.5k = $48.75k

At 6k/yr = (7.5 yrs x 6k) + 7.5k = $52.5k

At 7k/yr = (7.5 yrs x 7k) + 7.5k = $60k

 

At abysmal resale value of $5.5k/yr, already can break even.

This is great analysis, thanks! In this case the owner bought for... I think something like 130k. He's left with about 50ish/60k,but has been offered by both dealer and agent the region of 40,with about 5 years to go.

[Mkl22]

Yup it's a manual. Actually the car I'm looking to buy, seems like the owner is kinda stuck. He's been offered a price a fair bit lower than what his loan amount is, and my offer is already higher than that.

This is great analysis, thanks! In this case the owner bought for... I think something like 130k. He's left with about 50ish/60k,but has been offered by both dealer and agent the region of 40,with about 5 years to go.

Why not you offer 45k or a bit more. Even 10k also dun have to redeem the loan?

[flashbang]

but 40% include COE leh. so mathematically, still can happen. haha

Possible but very unlikely for B&B cars. More chance if driving a rare car or luxury car where the value drops greatly for second hand.

[Perspectivism]

Well deserved. Borrow more than one is able to repay.

 

Let this be a reminder to other Singaporeans not to bite more than one could chew.

Edited October 10, 2017 by Perspectivism

[Jq1988]

Ai ya, just work part time to pay off the car. No headache. Prepare a better expenditure plan!

[Cokiee]

Why not you offer 45k or a bit more. Even 10k also dun have to redeem the loan?

Edited October 10, 2017 by Cokiee

[Cokiee]

Ai ya, just work part time to pay off the car. No headache. Prepare a better expenditure plan!

 

This is part of his plan. Dude's not in dire circumstances, just taking proactive actions to reduce his monthly debt expenses. Part of the reason why he's selling the car is that the current job affords him a car, and there's no need for two at home.

[Mkl22]

I could lah.. but doesn't make sense for me to offer more from a commercial perspective ma, right? hehe.

 

 

I don't disagree. That said I also don't think it's definitely the fault of the owner in this case; sometimes people just aren't financially savvy and you really won't know what you won't know. But I digress and this is a story for another day (and thread).

 

Edit: i think it can also be a function of the market.

Usually direct buyer pays a little more than the price if one sells to a dealer. If I’m the seller why should I bother with a direct buyer when both offers the exact same price Edited October 11, 2017 by Mkl22

[Cokiee]

Usually direct buyer pays a little more than the price if one sells to a dealer. If Iâm the seller why should I bother with a direct buyer when both offers the exact same price

Yes agree. Which is why the price I'm buying the vehicle from him at is indeed higher than at the dealer.