If you think you can upgrade your current middle-of-the range car for a sleek, eye-catching, wow-factor exotic one — think again.
An advertisement by financing company FutureFin, which promises people earning R40 000 a month the chance to drive the car of their dreams for only R2 900 per R1-million, is a bit misleading, to say the least.
According to FutureFin: ‘This is not for someone who is currently driving a Golf but who now wants to drive a Porche for the same instalment.â€
The financing structure offered by FutureFin is for someone who can afford the car of his or her dreams, but who wants to better utilise cash flow.
Rather than putting R1-million of cash on the table, he or she can finance the vehicle and keep the lump sum to invest in a business, or another investment, that may perform better than the current interest rates.
If you want to use FutureFin’s services, you have to put down a 25% deposit — that is, R250 000 per million rand of car. Realistically, how many people on R40 000 a month have that kind of spare cash — unless they are taking the receiver for a ride?
The financing is also based on an 85% residual. If the person sold the car for the same price as he or she paid for it, for example R1-million, R850 000 would have to be paid to FutureFin, leaving R150 000 in the person’s pocket.
Just to buy another car of the same value, a person would have to put in an extra R100 000 to make up the R250 000 deposit.
FutureFin only offers this financing on luxury vehicles that are likely to retain their value and it has a limited list of cars it is prepared to finance.
The reason for financing the vehicle over a 24-month period is, firstly, to limit the depreciation of the asset and, secondly, because the interest rate is fixed for the period of the loan and no sane bank, Absa in this case, would offer a fixed rate for more than two years.
FutureFin says its clientele are the sort of people who tend to flip their cars every nine months so there is no requirement for financing beyond that term. Effectively, the product is for high-flyers who want a mechanism to lease a car they can swap as soon as they get a bit bored with the colour or when a newer model is released.
FutureFin’s advertising campaign must be causing havoc for its call centre, which is probably flooded with calls from R40 000-a-month salaried Golf owners, who are hoping to spice up their lives, only to be told that their dream can never be a reality.