Selling A Pickup Which Is Under Finance

[Artist]

We own an Isuzu Highlander 4 door automatic pickup near Udon Thani which we bought a year ago on a 5 year finance deal from the Isuzu dealer, in my wife's name. Now we have to return to Australia to care for my elderly parents.

I have been trying to find out how we go about selling a car which is under finance but the contract is in Thai and its very difficult to get clear information. I have been told that the dealer will take the car back and pay us 40,000 baht which is a fraction of what we have paid for it.

In Australia I would simply pay off the outstanding amount from the finance company and then sell the vehicle. Usually in Australia I would only have to pay the interest incurred to date if I did this, but I have been told that if we want to pay out the finance here will have to pay the interest for the whole five years. Can anybody tell me whether this is likely to be correct?

Any advice on the best way to sell the vehicle would be great.

The insurance is due on the pickup and I am wondering whether I can pay for less than a full year or get a refund when I dispose of the vehicle. Anybody know?

Thanks for your help

Jeremy

[johnh101]

I think he is trying to screw you.

I was told I could pay the finance off at any time without paying the outstanding interest.

[Gary A]

I looked at a car loan a few months ago. The interest rate sounded very good until I got out the calculator. As I understood that deal the interest was add on and was calculated over 60 payments. No such thing as an early payoff discount. However many payments are left is what the payoff is. It's a rotten deal but TIT.

[rono]

Dont know what company you leased from, when I wanted to sell my car under finance I called the finance company and asked them how much I had to pay if I cleared the outstanding debt at once, it was much less than was stated on my monthly bill and was fair when I made my own calculations.

I think there are 2 ways to clear, one is the bad way, just park it at the finance headquarters and leave or find a second hand car seller who pays cash for you car, the seller will clear the finance for you but dont expect a lot of cash from him in your hands.

[kasi]

You don't say who is actually carrying the paper on the truck. A bank? The dealer?

In the west the norm who be a bank. Who you would simply call and request what the payoff is. That amount is what you would have to pay before you had clear tittle to sell it.

60 month contract are terrible deals for the consumer. Typically you are in a situation during most of the term of the contract where you owe much more than the vehicle is worth.

How much down payment did you put down and what are the monthly payments?

You probably put 10% down. Assuming a 8.5% loan you are probably making payments in the 15-20K range.

I'd say if you can walk away clean from the deal with 40K in your pocket you're in pretty good shape.

Figure driving a new truck around for a year is going to cost something! You are making a mistake to think making payments the first year on a 60 auto loan contract will build you any equity whatsoever.

No free lunches in the car biz unless you're in the biz.

Take the 40K, run and don't look back.

Edited February 25, 2006 by kasi

[Thaising]

I think he is trying to screw you.

I was told I could pay the finance off at any time without paying the outstanding interest.

It's all depend on which finance company you took the loan, and the hire purchase agreement you signed. I try to clear my loan in advance but was told to clear all the outstanding interest, that's sucks.

[kasi]

I used to be in the biz and as I remember these 60 month contract would front load interest during the first couple of years. So trying to get out of one without owing them money is not the norm. I'd say Artist should consider himself lucky to get out of it with some money in his pocket and credit intact.

[Artist]

Just to clarify a few points. We paid a deposit on the pickup of about 250,000 baht and according to my calculations the interest component of the 60 monthly payments is about 100,000 baht.

The finance was organised by the Isuzu dealer and as far as I can make out it was with a separate finance company. It was all done in Thai (or Lao) with a visit of 4 people representing the dealer and the finance company coming to the village to spend a couple of hours of animated discussion with family, friends and neighbours combined with much copying of id cards and signing many documents.

As always in such matters when I tried to find out what the deal was I was told not to worry as "this is the way we do it in Thailand" which usually means that my wife and her family don't have a clue how it works.

Combining the deposit with the payments over one year we have an equity in the vehicle of about 375,000 baht. I estimate the buyout figure assuming we pay the outstanding 48 monthly payments to be about 520,000 baht.

The pickup cost nearly 800,000 baht. I don't know what its current value is but assuming it dropped 20% in the first year it would be worth 640,000 baht so buying out the finance and selling it would net us about 120,000 baht, a lot better than the 40,000 baht offered by the finance company.

The problem I have is that I am not sure if we really have to pay the full outstanding payments or perhaps we can get away with just the interest to date. In my experience my wife and her family will take the initial advice from the finance company without questioning it as they are really country people dealing with big city slickers and they would not want to lose face. Whereas being a farang who has no face I would dig into it to see if I could get a better deal. However when I try to do this I run into the inevitable communication difficulties and the 'not done in Thailand' stone wall.

From the replies so far it looks as though I will have to pay the full interest and I guess it depends on the contract. I don't really want to go to the expense of getting an english speaking lawyer to look at it but maybe that's the only way I can be sure of my liability.

[paulfr]

It probably does depend on the contract you signed with the finance company.

When I bought my Toyota, the finance guy declined to give me a buyout price at 1 and 2 years but said it would be a little more than the remaining balance implying a small prepayment penalty. Who knows what they will say if I do need to buyout early ?

Talk to a Thai lawyer as Thai law is pretty good for the consumer in many cases.

As you know, they (the finance co) will often try to bluff you but then cave in if you press them, especially if you have a lawyer. Thais hate confrontation. Don't give up and you will likely get a fair deal in the end unless the contract says differently and is not in violation of Thai consumer laws.

BTW, for those who do not know, interest is paid on the FULL balance for the entire loan. So you pay about twice the interest that you would pay in the West.

[Artist]

It probably does depend on the contract you signed with the finance company.

When I bought my Toyota, the finance guy declined to give me a buyout price at 1 and 2 years but said it would be a little more than the remaining balance implying a small prepayment penalty. Who knows what they will say if I do need to buyout early ?

Talk to a Thai lawyer as Thai law is pretty good for the consumer in many cases.

As you know, they (the finance co) will often try to bluff you but then cave in if you press them, especially if you have a lawyer. Thais hate confrontation. Don't give up and you will likely get a fair deal in the end unless the contract says differently and is not in violation of Thai consumer laws.

BTW, for those who do not know, interest is paid on the FULL balance for the entire loan. So you pay about twice the interest that you would pay in the West.

Thanks for the good advice paulfr. I think I will get a lawyer to look at it. Anybody know a good one in the Udon Thani/Nong Khai area?

I didn't realise that the interest was not on a declining balance. I guess thats good for me if I can get out of paying the remaining interest.

[chuchok]

Ask terdsak_12.He should know, as he is in the business at expatmoters.co.th.

[kasi]

The pickup cost nearly 800,000 baht. I don't know what its current value is but assuming it dropped 20% in the first year it would be worth 640,000 baht so buying out the finance and selling it would net us about 120,000 baht, a lot better than the 40,000 baht offered by the finance company

Then you have to find a buyer and make the payoff to the finance co. yourself.

Balance that with the time it takes the hassle the lawyer what your time is worth and if it's worth 80K then play it that way.

You should realize though the moment you signed that contract you where hosed.

Five year finance contracts on vehicles are loose-loose situations for a consumer.

For the 250000 down payment with a little shipping around you could have purchased an adequate used 2wd pickup outright which you could just park somewhere till you come back or sell for a modest depreciation.

Edited February 26, 2006 by kasi

[Gary A]

When I was dealing on my last new vehicle I wanted the 3.75% interest rate. Since it is add on interest I wanted a one year loan. In fact I even was willing to go for a two year loan. I had many people in the dealership talking on the phone to the finance people trying to figure out what to do with this troublesome farang. The shortest loan period was five years and they would have liked me to take the six year loan. I paid cash and they didn't much care for that either. LOL!

[kasi]

When I was dealing on my last new vehicle I wanted the 3.75% interest rate. Since it is add on interest I wanted a one year loan. In fact I even was willing to go for a two year loan. I had many people in the dealership talking on the phone to the finance people trying to figure out what to do with this troublesome farang. The shortest loan period was five years and they would have liked me to take the six year loan. I paid cash and they didn't much care for that either. LOL!

That's right!

Car dealers love these long finance contracts. They make more money off the finance contract than off the actual sale of the vehicle.

They rope in a lot of people like Artist here. Actually Artist is lucky he put 30% down otherwise he would be in the situation where he owed them money!

The worst is when a guy after 3 years into a 60 month contract decides he wants to trade for a new truck. He's in for a rude awakening.

I still think Artist is getting off easy with what the finance company offered him.

[Digger]

Another way of looking at this is to calculate how many months are remaining multiplied by the monthly payment your making. For example:

36 months @ 12,000 baht = 432,000

Your valuation of what the pick up truck would be worth (and if its Issuzu or Toyota, it will not have dropped much at all) = 600,000 baht hyperthetically.

Put it up for sale, already on finance and say the price is 168,000 baht down + 36 months at 12,000 baht. Subject to finance company agreeing the finances of the new buyer. Its surprisingly easy - the finance company have already receovered the down payment and the monthly payments you have already made, so are only carrying in this case a 'risk' of 432,000 baht - its how Thai's and in particular Thai traders handle vehicle sales - basically they often DO NOT pay of the finance, but keep it going.

End result for you is walking away with 168,000 baht + selling a vehicle with a down payment of only 168,000 is a lot easier than looking for someone with the full 600,000 baht in cash. The buyer then makes the rest of the repayments and ownership is transferred to him when he or she has completed the agreement.

Edited February 26, 2006 by Digger

[chanchao]

I think you're all going the wrong direction with this. You do not NEED to pay off the loan at once. It just gets transferred to the new owner, who will continue the loan. As not many second hand vehicles can have attractive financing options, this is actually a Good Thing.

The only problem is perhaps that your initial payment of 250,000 was very high. So when selling it, there's relatively a lot of money you want right now, versus a low monthly loan amount. Thais tend to prefer it the other way around, like pay just 100K and then just suffer the monthly payments.

Anyhow, the right way is NOT to try to pay it off, then sell it, but to sell it INCLUDING finance. Ask the finance company. Call them, the number's on there somewhere. Or ask someone who speaks Thai and understands such things. (From the sound of it not your wife or her family).

Cheers,

Chanchao