“If you have a dumb incentive system, you get dumb outcomes” Cash vs Finance

[turgid]

I recently got a decent (tax paid) inheritance.  I already had enough to see me through, I dont have kids, I have an actuarial life of  10 years +- 5  and own a 7 year old Nissan that's getting a bit tired.

I am of an age where this could be my last significant car splurge  until I am forced to downsize to an electric golf cart or cremation urn.

Lucky me - not complaining - yet.

I visited the Bangkok motor show and looked again at an expensive German SUV Hybrid that i've admired for a while.

No I dont need it. Yes I want it. Yes I know >30% will fall off the value when I drive it out of the showroom.

The same day there was a show related report in a reputable  international news outlet that 30% of Thai car finance applications were being rejected.

Apart from general economic doldrums this was reported as due to high interest rates and the low residual value of trade in vehicles after clearing the loan (or zero residual value due to misunderstood/mis-sold balloon loan arrangements).

 

I told the sales staff that as a foreigner I am ineligible for finance,  so I would regretfully have to pay cash - was there a deal to be had?

For overseas readers the price for the same specification in the US would be around $90K, in Thailand it's $150K 

I was told with cash I could get delivery of any of the 4 (12 USA) available Asean colours in 7 days. It's Thailand so you get no other options, specification, choices.

So presumably they have an Asean bonded warehouse somewhere where they just need to polish the wax off, load the Thai code for telco, GPS, language etc and deliver it. But no shortage of cars apparently.

All sorts of deals were available with finance - free insurance - a show deal that the free extended service for 3 years would be upgraded to 5 years.

For cash buyer - nothing. No discount, buy your own insurance,  standard 1 year warranty, 5 years service plan and extra 600K+ Baht.

 

I dont know what it costs to insure and warehouse this stuff, demand would appear to be low, the annual depreciation clock is ticking on the stored cars (Thailand typically runs 6-12  months behind in model years but the 2025 upgraded model is already announced in the US). 

With a same day deposit they had a guaranteed buyer without having to wait 30 days with a 30% chance the deal will implode.  

 

No "i'll check with the boss" but an unusually frank response that all the perks and benefits are funded out of the finance arrangement so nothing could be done.  

That says to me they are in the finance business not the car business. It's also why I havent mentioned the exact brand because I suspect that level of honesty isn't brand or dealership sanctioned.

Bemused - I passed - obviously I didnt want it that badly.   

 

Interestingly a condo purchase I was looking at has just offered me a 1M Baht discount if I can complete before the end of May.

So presumably their sales and incentive structure is a bit different.

 

 

 

 

[CharlieKo]

Do you have a wife or long term Thai girlfriend who might be willing to stand as surety for a loan on a vehicle? If so you could get finance for the car. 

[vinny41]

55 minutes ago, turgid said:

I recently got a decent (tax paid) inheritance.  I already had enough to see me through, I dont have kids, I have an actuarial life of  10 years +- 5  and own a 7 year old Nissan that's getting a bit tired.

I am of an age where this could be my last significant car splurge  until I am forced to downsize to an electric golf cart or cremation urn.

Lucky me - not complaining - yet.

I visited the Bangkok motor show and looked again at an expensive German SUV Hybrid that i've admired for a while.

No I dont need it. Yes I want it. Yes I know >30% will fall off the value when I drive it out of the showroom.

The same day there was a show related report in a reputable  international news outlet that 30% of Thai car finance applications were being rejected.

Apart from general economic doldrums this was reported as due to high interest rates and the low residual value of trade in vehicles after clearing the loan (or zero residual value due to misunderstood/mis-sold balloon loan arrangements).

 

I told the sales staff that as a foreigner I am ineligible for finance,  so I would regretfully have to pay cash - was there a deal to be had?

For overseas readers the price for the same specification in the US would be around $90K, in Thailand it's $150K 

I was told with cash I could get delivery of any of the 4 (12 USA) available Asean colours in 7 days. It's Thailand so you get no other options, specification, choices.

So presumably they have an Asean bonded warehouse somewhere where they just need to polish the wax off, load the Thai code for telco, GPS, language etc and deliver it. But no shortage of cars apparently.

All sorts of deals were available with finance - free insurance - a show deal that the free extended service for 3 years would be upgraded to 5 years.

For cash buyer - nothing. No discount, buy your own insurance,  standard 1 year warranty, 5 years service plan and extra 600K+ Baht.

 

I dont know what it costs to insure and warehouse this stuff, demand would appear to be low, the annual depreciation clock is ticking on the stored cars (Thailand typically runs 6-12  months behind in model years but the 2025 upgraded model is already announced in the US). 

With a same day deposit they had a guaranteed buyer without having to wait 30 days with a 30% chance the deal will implode.  

 

No "i'll check with the boss" but an unusually frank response that all the perks and benefits are funded out of the finance arrangement so nothing could be done.  

That says to me they are in the finance business not the car business. It's also why I havent mentioned the exact brand because I suspect that level of honesty isn't brand or dealership sanctioned.

Bemused - I passed - obviously I didnt want it that badly.   

 

Interestingly a condo purchase I was looking at has just offered me a 1M Baht discount if I can complete before the end of May.

So presumably their sales and incentive structure is a bit different.

 

 

 

 

Your best option is if you know a Thai person that has a facebook account is join the facebook group for that

car brand post in Thai that you are looking for model x colour x  if there are plenty of cars around you will get replies from dealers ,

Make sure all replies to facebook page are in Thai so as far as the dealer is concerned its a Thai person that is buying don't mention how you are going  finance until the end of negotiation after you have received the initial reply back from your post they will want a phone number make sure you give the number of a Thai person

Free Insurance , extended warranty service plan are available to cash buyers but only when you have hooked them in and you  let them know that a different dealer or brand without naming the dealer or brand is willing to offer you what you require if they are not interested in a sale

You are correct they are more interested in finance only deals as that is where they get the bulk of their commission

With Thai buyers they will always suggest lowest possible down payment and spread the finance over 7 or 8 years

Government has set rules for new car interest rate at max 10% per year so on a 8 year loan deal that nearly the cost of paying for 2 cars but only buying one

At the moment dealers are selling cars in a depressed market so there should be offers on the table

[Liverpool Lou]

1 hour ago, turgid said:

That says to me they are in the finance business not the car business.

No, they are in the commission business, that's why they push finance.

[Liverpool Lou]

1 hour ago, turgid said:

Interestingly a condo purchase I was looking at has just offered me a 1M Baht discount if I can complete before the end of May.

So presumably their sales and incentive structure is a bit different.

They offer that to all prospective buyers, not just you, and that is also built into the price structure same as the car dealers.

[CharlieKo]

49 minutes ago, vinny41 said:

Government has set rules for new car interest rate at max 10% per year

Not sure where you get 10% from. Bought a new car for the wife and paying under 2% per annum interest on the loan.  

[motdaeng]

1 hour ago, CharlieKo said:

Not sure where you get 10% from. Bought a new car for the wife and paying under 2% per annum interest on the loan.  

 

by the way, since you're reducing your loan monthly, your effective interest rate is closer to 4% rather than only 2% ...

[Captain Monday]

They are in the business of sales commission, spiffs and rip-off finance and stupid options everywhere

Cash buyers with an internet quote are a waste of time for them.  

[vinny41]

4 hours ago, CharlieKo said:

Not sure where you get 10% from. Bought a new car for the wife and paying under 2% per annum interest on the loan.  

Interest rate does depend on % of down payment and how many months installments

As you can see here you can pay a whopping 15.81% per year

https://www.motorist.co.th/en/article/2592/car-loan-interest-rates-in-thailand-for-all-banks-in-2024

[AustinRacing]

It seems silly and unfair to a cash buyer. As has been said they’ll make more money from financed cars and as such can absorb additional costs such as accessories and insurance. Economic-wise it makes sense. 

[Celsius]

once you get a car, you'll get bored with in within 1 month. In Thailand leasing is also possible, although I am not sure about higher end cars.

 

The YOLO effect can be quite tricky sometimes.

 

I would definitely go for a condo.

 

 

 

 

 

 

[Henryford]

I have bought 3 new cars in Thailand for cash. I always got a discount, 1 yr free insurance and a few freebies. Maybe BMW/Mercedes think that only peasants ask for such incentives.

[paddypower]

On 4/16/2024 at 12:24 PM, turgid said:

I recently got a decent (tax paid) inheritance.  I already had enough to see me through, I dont have kids, I have an actuarial life of  10 years +- 5  and own a 7 year old Nissan that's getting a bit tired.

I am of an age where this could be my last significant car splurge  until I am forced to downsize to an electric golf cart or cremation urn.

Lucky me - not complaining - yet.

I visited the Bangkok motor show and looked again at an expensive German SUV Hybrid that i've admired for a while.

No I dont need it. Yes I want it. Yes I know >30% will fall off the value when I drive it out of the showroom.

The same day there was a show related report in a reputable  international news outlet that 30% of Thai car finance applications were being rejected.

Apart from general economic doldrums this was reported as due to high interest rates and the low residual value of trade in vehicles after clearing the loan (or zero residual value due to misunderstood/mis-sold balloon loan arrangements).

 

I told the sales staff that as a foreigner I am ineligible for finance,  so I would regretfully have to pay cash - was there a deal to be had?

For overseas readers the price for the same specification in the US would be around $90K, in Thailand it's $150K 

I was told with cash I could get delivery of any of the 4 (12 USA) available Asean colours in 7 days. It's Thailand so you get no other options, specification, choices.

So presumably they have an Asean bonded warehouse somewhere where they just need to polish the wax off, load the Thai code for telco, GPS, language etc and deliver it. But no shortage of cars apparently.

All sorts of deals were available with finance - free insurance - a show deal that the free extended service for 3 years would be upgraded to 5 years.

For cash buyer - nothing. No discount, buy your own insurance,  standard 1 year warranty, 5 years service plan and extra 600K+ Baht.

 

I dont know what it costs to insure and warehouse this stuff, demand would appear to be low, the annual depreciation clock is ticking on the stored cars (Thailand typically runs 6-12  months behind in model years but the 2025 upgraded model is already announced in the US). 

With a same day deposit they had a guaranteed buyer without having to wait 30 days with a 30% chance the deal will implode.  

 

No "i'll check with the boss" but an unusually frank response that all the perks and benefits are funded out of the finance arrangement so nothing could be done.  

That says to me they are in the finance business not the car business. It's also why I havent mentioned the exact brand because I suspect that level of honesty isn't brand or dealership sanctioned.

Bemused - I passed - obviously I didnt want it that badly.   

 

Interestingly a condo purchase I was looking at has just offered me a 1M Baht discount if I can complete before the end of May.

So presumably their sales and incentive structure is a bit different.

 

 

 

 

Great story! Age wise, I'm in the same boat, (78) excepting I have to be careful with our retirement capital, as my wife has special needs. I had the opportunity to cash in capital gains of 1+ MM baht earlier this year. I was very close to buying a car, (which I seen listed for sale here in Thailand). It is similar to the one  I used to drive/race back in Canada 25 years ago. A 1984 manual Porsche 944.  the only reason I'm posting is - we all have our dreams. I don't think that buying a new car should be one of them - especially many German models, most of which look indistinguishable from cars built in SE Asia.  If you're keen on a German built car, why not wait for the coming financial collapse of the Thai economy. One of the first things to come available cheaply, is luxury cars.

[paddypower]

1 hour ago, Celsius said:

once you get a car, you'll get bored with in within 1 month. In Thailand leasing is also possible, although I am not sure about higher end cars.

 

The YOLO effect can be quite tricky sometimes.

 

I would definitely go for a condo.

 

 

 

 

 

 

that reminds me of one of those bad jokes I heard about having a girlfriend. ''Don't buy one, just treat it like you would a book. Go to the library and return it after you've read it''. (pretty disgusting attitude, but then it did come from a bar fly) .

[Chongalulu]

On 4/16/2024 at 2:36 PM, CharlieKo said:

Not sure where you get 10% from. Bought a new car for the wife and paying under 2% per annum interest on the loan.  

As another poster pointed out that is not APR (true interest rate) Briefly by halfway through the repayment period you've repaid half the capital but still being charged interest on the whole sum. It roughly works out at double the quoted sum. But at 4% real rate that is still good and beating inflation,so you are actually ahead ! 

[gamb00ler]

To find out your true APR, use an online mortgage calculator.  If you enter the number and size of payments, the initial amount borrowed, it will calculate the APR.

[Phulublub]

8 hours ago, Henryford said:

I have bought 3 new cars in Thailand for cash. I always got a discount, 1 yr free insurance and a few freebies. Maybe BMW/Mercedes think that only peasants ask for such incentives.

maybe that is it, as my (only) car purchase here gained a decent discount.  But not on a "high end" car.

 

PH

[CharlieKo]

3 hours ago, Chongalulu said:

As another poster pointed out that is not APR (true interest rate) Briefly by halfway through the repayment period you've repaid half the capital but still being charged interest on the whole sum. It roughly works out at double the quoted sum. But at 4% real rate that is still good and beating inflation,so you are actually ahead ! 

That isn't actually correct. My understanding is that you pay off the interest first before the capitol amount is reduced. interest is not calculated on an amount outstanding. It is calculated on the loan amount. I Know the amount I borrowed and I also know the amount that will be paid back over the period of the loan.  

[Chongalulu]

On 4/18/2024 at 5:03 PM, CharlieKo said:

That isn't actually correct. My understanding is that you pay off the interest first before the capitol amount is reduced. interest is not calculated on an amount outstanding. It is calculated on the loan amount. I Know the amount I borrowed and I also know the amount that will be paid back over the period of the loan.  

You don’t really understand the mathematics. If I charged you 5% p.a. on a loan of £100 you would pay nothing back until the end of the year when you would pay me £105 . That is true APR and how your bank pays interest on a savings account . If you started paying the loan back via monthly payments say over a year then clearly you haven’t had the benefit of borrowing £100 for a full year,thus you are paying a higher interest rate. If you need that explained in more detail I suggest you google it.