Car
April 15, 2015
PORSCHE | Part 2: What is a Guaranteed Future Value Loan?
Part 2: What is a Residual Value Loan?
Faced with a quote for the "911 Carrera," I asked a sales staff member about the "special loan" that's been on my mind lately.
By Satoshi UbukataWith cooperation from:PorscheJapan and Porsche Center Meguro
With a conventional car loan, you finance the entire amount. However, with a residual value loan, you finance the amount minus the future trade-in value (residual value or guaranteed future value), which allows for lower monthly payments.
Lower monthly payments
A plan to acquire a new "911 Carrera" with a 5-year loan at just over 180,000 yen per month. It wasn't a bad offer, but I decided to ask the sales staff about the residual value loan that had caught my attention.
"Yes, you mean the 'Porsche Power Loan,' don't you?"
Residual value loans, also known as guaranteed future value loans, are a relatively new type of program that is also being actively introduced for Japanese cars recently.
The key feature is that the trade-in value at the end of the loan term is set as the residual value (guaranteed future value), and by paying this amount in the final installment, the monthly payments are reduced.
Indeed, looking at the figures, there was a significant difference in payment amounts: 150,880 yen for the initial payment and 145,000 yen per month. This means the monthly payments are 38,700 yen less.
Of course, a residual value loan isn't a "magic loan." While monthly payments are reduced, there's a trade-off somewhere. The most significant is the final payment, which for a 911 Carrera purchased with the Power Loan amounts to 2.7 million yen – enough to buy a new "Volkswagen Golf."
The table below compares the conventional "Porsche Auto Loan" with the residual value type "Power Loan." You'll notice a difference in the total amount paid. The total payment for the Power Loan is 237,880 yen higher than the Auto Loan. This is because interest is applied to the residual value for the payment period, and fundamentally, the guaranteed future value is not the same as a down payment.
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Using a Residual Value Loan with Porsche
The clever aspect of this loan is that the residual value, carried over to the final payment, doesn't necessarily have to be paid in cash. For example, it's possible to finance the residual value with a new loan. Alternatively, if you wish to part with the car at this point or trade it in for another vehicle, you can use the proceeds from selling the car to cover the guaranteed future value.
In Porsche's case, unless the mileage is extremely high, the car is treated roughly, or involved in an accident, the resale value is unlikely to fall below the guaranteed future value.
Understanding the above, choosing the Power Loan makes it seem possible to acquire the coveted 911 without straining my finances. The day to take that new step seems close.
In the next installment, I will delve into the new consumption patterns created by residual value loans.
Porsche Center Meguro
2-8-21 Naka-Meguro, Meguro-ku, Tokyo 153-0061 Tel. 03-3719-6221