Another Pen Fed question! "Payment Saver" financing

[Cashoverass]

Hi guyssss, so I've already been approved for my 2013 Grey 60 (40 kwh) Model s with panor and upgraded sound system through Pen Fed but in speaking to them, one of their representatives tried to sell me on their "payment saver" loan. It's almost like a lease, you pay drastically reduced payments for the first 35, 47, or 59 months and then on your final month payment you have to cough up like 10's of thousands of dollars.

Then I told her what kind of car i was getting and she said nopeeee. The payment saver wouldn't be available for a model s because they have no idea what the depreciation or residual value would be. And that was disappointing but fair. I understood they can't take that much risk.

However, with the "big news" that Tesla will purchase the car back after 3 years, now we do know what the depreciation would be.

So I've contacted Pen Fed again. Actually I just E-mailed the chairman of the board, to reconsider allowing this financing for the Model S.

Would anyone else here be interested in this if it existed? It seems like a very irresponsible loan for someone who might consider driving the car for 3-5 years but I don't own a car for more than 1-2 years tops. So I'll sell welllll before that balloon payment kicks in and payoff the loan at that point.

Thoughts?

 

[NEWDL]

Here is the general issue with this type of financing:

Depending on the state in which you reside, more often than not, in a balloon payment style loan (all come with different marketable names) the state requires the lender to offer that the balloon payment be financed at the same rate as the initial term. This ends up meaning that they increase your initial rate in order to cover the risk for financing both a new car (initial term) and used car (balloon payment). If you were to look at the overall finance charge for a balloon style loan vs a traditional finance the balloon loan will generally be higher than a traditional finance.

Please let me know if your findings differ from my experience.

 

[Cashoverass]

hmm. Thanks for the input! Let me make sure I understand. What you're saying is, the lender may have to give you a second loan for the ballon amount at the same terms of the first loan and therefore the first part of the loan is sometimes not-too-good so that if you re-finance the ballon amount with them, you get the same, not too good terms? and they average out to slightly worse terms/apr than a traditional loan with really great terms?

That makes sense and actually sounds fair. My main goal is to get the lowest possible payments for 2-3 years without leaving a huge down payment. I'd sacrifice 1 or 2 points of APR if it meant financing a way smaller amount through one of these loans.

 

[NEWDL]

Basically yes, that is what I am saying.

As log as you fully understand how these programs can work and feel you can use them to your advantage, I wish you the best of luck.

The lender is not required to take the vehicle back after the first term, you are required to purchase it.

Do yourself a favor and look at the difference in payment between the longest term traditional finance (w/o balloon) and this balloon program. If the difference in payment isn't that large, look at the overall finance charge.

I am not saying it isn't a good program, and people can use it to their advantage, I am just concerned that they will set both a high rate and a poor balloon payment in order to force you away from this loan.

 

[joshuaeven]

One more thing to consider. Looking down the road, in 3 years when Tesla starts buying back cars under their finance program, you won't be able to sell your car for what Tesla is selling them for. A buyer will pay the "certified pre-owned" price to Tesla, not a private seller.