Buying a car? Keep this in mind

If you are buying a car, there are various things to keep in mind to ensure you do not end up out-of-pocket instead of enjoying your new wheels. It is a substantial commitment to buy a car, especially since it extends beyond paying back the entity that financed the car.

South African car buyers do not always think about everything before they buy a car, Karen Rimmer, head of distribution at PSG Insure, says. “In South Africa, with its high road accident ratio and high crime rate, car buyers must prioritise being financially protected against the risks of the road.”

She says part of taking the proper precautions involves taking out comprehensive insurance cover, which comes with its own set of responsibilities. First-time car buyers must beware of skipping car insurance as a way of cutting costs.

“It is not unusual to hear of many cases where parties involved in car accidents do not have insurance or the means to cover the cost of repairs or a complete write-off, either on their own cars or the third parties’ cars.”

Reaching a resolution after those kinds of unfortunate incidents can be extremely difficult and in many cases one or both parties are left without a car for the foreseeable future, she warns.

“To keep themselves protected, drivers must remember that there is a degree of flexibility involved in taking out car insurance and working closely with an adviser can assist car owners to choose cover that is cost-effective for them. Advisers can assist clients in shopping around for quotes and help them to explore a variety of different options.”

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What happens when you lease when buying a car?

What about lease-purchased vehicles? Rimmer says while many car buyers opt for traditional bank loans, there has also been a noticeable trend over the past few years to opt for lease-purchase agreements.

In these cases, individuals acquire a vehicle without paying the full purchase price upfront. The agreement typically involves a series of monthly payments over an agreed period, during which the driver effectively leases the vehicle but has the option to buy it at the end of the term.

In these cases, car dealerships usually insist that drivers take out comprehensive cover which provides protection against damage to the vehicle and third-party vehicles or property. Rimmer says PSG Insure has reviewed cases where motorists initially took out this kind of cover, only to cancel it after the agreement has been concluded.

“However, this is not a good idea, given that in the event of a total write-off, the driver will be left without a vehicle.”

She says depending on factors like the vehicle’s cost or age, some individuals may choose third-party insurance, covering only damage to the other vehicle or property. Another option motorists can consider is third-party, fire and theft insurance.

It is also important to consider your risk profile as the driver. “Motorists must understand which factors influence their risk profile and how these factors can influence the cost of their premiums. Think of your risk profile in terms of the abbreviation, D.V.U. or ‘Driver. Vehicle. Usage.’”

This refers to aspects relating to the driver which contribute towards the cost of a premium and includes your age and driving experience. “Typically younger, less experienced drivers pay more for insurance as they are considered as a higher risk. The driver’s previous claims history will also be reviewed and factored into the premium charged.”

This means that motorists who submitted numerous claims within a short period of time rather than covering the cost of damage themselves, will most likely be regarded as a higher risk.

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Key factors about the car itself

Rimmer says there are also key factors about the vehicle itself, that insurers consider, such as the make and model of the car, which is an important rating factor, as well as whether the car has been modified or customised in a material way that could affect its replacement value.

“Insurers have also been made aware that criminals are deliberately targeting certain kinds of cars, which has resulted in the premiums for these cars increasing to cover the associated level of risk.”

Thirdly, insurers also look at how the car will be used. “At the quotation phase, advisers and insurers will likely ask if you intend to use the vehicle for personal or commercial purposes, or a combination of both.

“The geographical location of where the car will be parked as well as the areas where it will travel frequently, will also be considered in terms of broader factors, such as the rate of motor-related crime in those areas.”

Rimmer reminds consumers that they must notify their insurers if any of the information supplied at quotation phase changes before hitting the road. “One of the top reasons why claims are repudiated is when drivers do not promptly disclose important changes relating to the driver, the vehicle or its usage.”

She says it is important for motorists to develop a close relationship with their insurance advisers and uphold clear channels of communication to ensure that as their lifestyle changes and evolves, the cover on their cars are updated to reflect this. Advisers can also offer valuable insights and advice on the terms and conditions of car insurance policies, as well as any exclusions that may apply.