From financing to licensing to hunting for vehicle insurance quotes, there’s plenty to think about when you decide to purchase your own car.
This post was published on 22 Feb, 2017

As providers of some of the most dependable vehicle insurance South Africa has to offer, we know that owning a car is a big responsibility not to be taken on without careful budgeting, planning and preparation. 

You can’t simply waltz into a dealership and buy the first car that catches your eye! It’s important to do your research and understand your financing options.

In an ideal situation, buying a car with cash would be the most practical and simplest way to go. Sadly, there aren’t many of us that can come up with that kind of money at a moment’s notice.

Considering that the price you’re paying for a car is intricately linked to the performance of the rand on the international market, potential buyers will have to decide for themselves whether saving up for the entire purchase price is a realistic idea. Most opt to finance their vehicle purchase through a bank or another credit provider.

Here are some commonly asked questions regarding car finance that all potential buyers should take into account:

Should I pay over 72 Months?

Over 80% of applicants for vehicle financing choose the 72-month period option in order to have smaller monthly repayments, but this isn’t always as good a deal as it seems.

The car might seem more affordable because of the smaller repayments, but that also means paying off the car will take that much longer. Remember that a car is a very quickly depreciating asset, and several years down the line you will end up making payments on a car that is worth a fraction of its original value.

This will make trading in your car that much more difficult, and you won’t get as much for it, so ideally you should budget to pay off your vehicle as quickly as possible. Of course you need to also factor in other car costs such as vehicle insurance and petrol before you can determine how much you can afford to pay on the repayments each month.

What about Balloon Payments?

Balloon payments involve making use of the residual value of the vehicle to buy a new vehicle before the full term of the sales agreement is reached.

In theory, the buy-back price should cover the entire remaining money owed on the car. But a balloon payment is the more expensive option at the end of the day, leading to increased interest costs for the consumer in the long term.

Balloon payments might be tempting because they allow you to purchase a more expensive car that you originally budgeted for, but many advise against them in general – you shouldn’t be buying a car you can’t afford anyway, and many buyers forget about the balloon payment and are shocked when, at the end of their loan period, they are confronted with another bill for the extra amount outstanding.

Be Practical!

Owning your own car is a great experience, but your top priority should be to not end up in a situation where you are struggling to keep up with the expenses you’ve taken on.

Maybe that means you’ll have to settle for a basic, practical and affordable model, but it’s better to suffer on without a fancy air conditioner, but that’s definitely better than suffering under unaffordable car payments.

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