What is residual value?

PART 2: Some vehicle-finance structures include a residual value (RV), sometimes called a balloon payment. This means part of the vehicle’s financed amount is left for payment at the end of the agreement rather than being paid through the normal monthly instalments. The guidelines supplied for this article show residual values on some newer vehicles. For example, the supplied figures show: Nedbank: up to 30% RV on 2026 models and 20% on 2025 and 2024 models. FNB: up to 30% RV on 2026, 2025 and 2024 models, and 25% on 2023 models. Standard Bank: up to 30% RV on 2026 and 2025 models, 25% on 2024 models and 20% on 2023 models. Bank Windhoek: up to 30% RV on 2026 and 2025 models, 30% on 2024 models and 20% on 2023 models. These figures are from the supplied finance guideline document and should be confirmed with the relevant finance provider before being used in a purchase decision.

Why does the RV matter? A RV can reduce the monthly instalment because part of the balance is postponed until the end of the agreement. However, the customer still has to deal with that final amount. For this reason, comparing vehicles based only on the monthly instalment can give an incomplete picture. Always ask what the final balloon or residual payment will be before signing a finance agreement. For example, why vehicle price and monthly payment are not the same thing. Consider two vehicles: Vehicle A Price: N$200 000 Newer model (2022-2026) 10% deposit (N$20 000) Longer available repayment period 72 months (+- N$3 506. 45) Vehicle B Price: N$160 000 Older model (2020-2018) 15% deposit (N$30 000. 00) Shorter repayment period 36 months (+- N$4 389. 56) Vehicle B costs less to purchase, but its shorter repayment period can make its monthly repayment higher than expected. The purchase price is…