City Press reports that in August, a judge granted Mercedes-Benz a court order cancelling the lease with Marawa and allowing the company to repossess the vehicle. It is likely the finance house was also given permission to seek a court order to collect on the loan balance after the vehicle was resold.
We don’t know the exact details but here’s an example of what could be the case. A Mercedes-AMG Lumma CLR G770 (a highly modified and customised G63) in our classifieds costs R5,7 million and according to our financial calculator on a package over 72 months with a deposit of R57 000 the monthly instalments will cost R102 744 at an interest rate of 13%. In this case, a 20% balloon or residual will be due after 72 months to the tune of R1,14 Million.
What is a balloon Payment?
When financing a vehicle, you kick things off usually by paying a deposit and then making smaller payments throughout the term of your vehicle finance. At the end of the term, you then owe one large lump sum payment at the end of the loan. This large payment is called a “balloon payment” because it usually resembles a balloon that has been blown up and is about to burst. This final payment can be paid to take ownership of the vehicle or refinanced to pay it off over an extended period
The Pros and Cons of Balloon Payments
There are some advantages to balloon payments. For example, if you have extra cash on hand and you want to invest it, you can use your balloon payment as an investment. This can help you earn more money in interest than what you would have paid in monthly instalments. Another advantage of balloon payments is that they can lower the overall cost of your loan. This is because the interest charges are spread out over a longer period of time, which can save you money in the long run.
However, there are some disadvantages to consider as well. One disadvantage is that if you are unable to make your balloon payment, you may be at risk of losing your home or your car (if you used it as collateral for your loan). Another disadvantage is that balloon payments can cause “payment shock” – this happens when your monthly payments suddenly increase because of the large lump sum payment that is due at the end of your loan term. Payment shock can cause financial hardship and may even force you to default on your loan.
Nonetheless, whether or not Marawa is to blame for his current predicament, it remains clear that failing to meet a payment deadline can have very serious consequences.
Find the pre-loved Mercedes-Benz of your dreams here.
Read the full story: City Press
Keyword: Robert Marawa said to owe R1 million to Mercedes-Benz