Bank Alfalah RV amount (Balloon Payment)

[aaz.ahmed]

Could anyone please tell me what does bank Alfalah mean by RV amount (Balloon payment) while leasing a car from them? I am confused since google search says that balloon payment means to pay the RV amount after the leasing tenure is over. I visited their branch near my place and they say that I don't have to pay anything extra except the monthly installments and down payment. If anyone has opted for Alfalah car loan with RV (Balloon payment) please let me know what it exactly means? Thanks

[arslansarwar]

You should call Alflah bank's 24/7 helpline to get confirmed information.

[aaz.ahmed]

I called their consumer department regarding this as well. They say I don't have to pay anything else except the down payment and monthly installments. Still I am confused so looking for someone who has opted for RV car loan.

[Xulfiqar]

The lease you are googling is probably from usa, in usa lease means finance the car for 3 years and 36000 miles, the residual value is predetermined at start of lease and lessee can choose to buy out the car at the RV with a balloon payment, meaning lumpsum.

The word car lease in Pakistan is called financing, change your search terms and you will get the idea.

What happens in uk and usa in lease is non existant in Pakistan.

If they are talking about a baloon payment at end of term then obviously this would have more terms like odometer limit etc.

Which i dont think so is existant in Pakistan as the risks are too great,

So ask them for a total, interest and principal total that you financed and how your installment services it.

[muh_farooq]

In the Residual Value Ijarah model, the monthly rentals are significantly lower than the regular Ijarah model because here the customer agrees to pay a certain sum to the Bank for acquiring the car upon completion of the Ijarah period. The customer also has the option that instead of paying the Bank and acquiring the car upon completion of the Ijarah period, he can simply return the car to the Bank.

This model enables the customer to take a car on significantly reduced rental. Customer can also, depending on his monthly rental payment ability, get a much higher-value car than he can under the regular Ijarah model.

[muh_farooq]

Alfalah Bank residual value is 50% written on their ads in express newspaper

[Xulfiqar]

Who is stopping the bank from blaming the customer for a dead car?

And why the eff is it called ijarah when its a pretty standard rental lease.

Are they explaining the wear and tear limits for the car?

Reason to say this is because Pakistani banks pull some really cheap tricks to trap customers and can rack up some insane charges.

[Xulfiqar]

50% RV after how many kms?

[muh_farooq]

Not explained. They simply write 50% residual value. I think on market value of car after leasing tenure ends?

[muh_farooq]

For meezan bank
Residual value (RV)
1 Years - 60%
2 Years - 60%
3 Years - 50%
4 Years - 50%
5 Years - 40%
6 Years - 35%
7 Years - 30%

[aaz.ahmed]

Actually what they are saying is that if you want to pay off the bank after sometime you can't pay them more than 50% residual value and there is a 10% penalty on the RV if you want to pay before your lease period. The bank itself is saying that one doesn't has to pay the 50% RV (balloon payment) after completing the installments. This is why I am myself getting confused.

[Xulfiqar]

If you are signing an agreement in which your interest and principal wont fully service the total price and interest amount then its a rental lease agreement.

If they claim a 50% RV after 5 years, they wont let you have the car as your agreement was for use till that date, kms and condition only. You cant drive off that car at half price, LOL

Read the conditions of returning the car, they usually are very strict, including a dealership evaluation sometimes.

[aaz.ahmed]

Confusion is cleared. I talked to the regional manager, he told me clearly that balloon payment 50% RV has to be paid after paying all the installments. Bank is just fooling people around with their car loan schemes. You will end up paying around 40 lakh rupees for corrola GLi Automatic although they have reduced the prices by 1 lakh rupees lolz

[khurem]

RV amount means Residual Value. It means that even after paying for the tenor of the loan, you won't have full ownership of the car and will pay the RV value if you want the car in your name. It is the opposite of downpayment, which is paid at the time of loan booking and RV is paid at the end.

These days since people are not going for car lease as the rates are very high, so banks desperate to deploy the excess liquidity, are basically duping people and show a relatively low monthly payment amount in their ads to make people believe that by paying this amount each month, they can have the car. They just put an asterik after the amount. This is deceptive marketing so don't fall for it. Also don't fall for Ijara financing (Islamic banking) which does even more deceptive marketing compared to conventional financing.

[aaz.ahmed]

Thanks a lot Khurem.

[Xulfiqar]

Islamic banking is like a kettle calling a pot black, the whole concept of banking is selling money, you can call interest as profit or attach some arabic word to it etc. but it doesnt matter. Its still the same old italian banking system.

[qwertypoiu]

Bank Alfalah islamic car ijrah does not offer RV product, commercial Alfalah lease offers RV option.

RV payment amount does not exceed 6month instalment amount.

So basically down payment car price minus RV amount. This way instalment is reduced and end of loan term you end up paying the RV amount lump sum

[Xulfiqar]

and does person have option not to buy it at end of term? - e.g. if car is a royal piece of trash

[chinyoti]

Dont confuse the toyota add. They have displayed minimum payments at 5 years lease and 50% RV. That is limited to toyota Corolla.

For the orignal poster of the thread.
Dont confuse RV and baloon payment.

RV is residual value, in such a case you can lease or finance a car keep a residual value to pay at the end of the lease / finance period to end the finance / Lease. This can be set at a preferred or permitted % agreed with the bank and you. In such a case monthly rental or installment becomes minimal.

Baloon payment in bank Alfalah means if in a month you have more cash you can deposit more then the agreed monthly amount and lessen your remaining installments amounts.

For example if your monthly agreed installment is 45000/month and you pay 200,000 in this month your other installments are divided by the remaining amount and your installments become less.

In bank alfalah case you are permitted 2 baloon payments in a year. After 6 months of your first installment

[chinyoti]

Yes if you refinance another car. The older car is adjusted as downpayment for a newer car.