Car finance insights

You have finally decided that you want to get your hands on a new set of wheels, and may have your eye on a few models. However, buying a car is not just a linear process, and the costs of your car don’t stop when you drive off the dealership or from private seller. The car financing phenomenon has been known to make the lives of many drivers easier, with payment plans that suit their pockets and lifestyles. If you are one of the drivers considering the car financing route, read on. In this article, you will get  online car financing tips and how you can get the best out of all your deals.

First, the numbers

More than just petrol is needed to power cars. There are always other monthly payments such as  the one-time expenses like your deposit, vehicle registration, and roadworthy certificate. To determine the purchase price you can afford, use a car affordability calculator, and be aware of the monthly payments associated with that price. It may also help to start saving up for a rainy day by setting aside some money every now and then while you still shop around.

Another major thing that you will need to put into your numbers consideration is insurance. While figuring out which car you want, start asking around for insurance companies and request their quotes on your favourites.

Second, stick to those numbers

A lot of vehice buyers will create a budget that showcases how much they need to spend on their car(s) once the purchase is complete but come buying time, they suddenly change their minds. Look at it this way; when it comes to cars, “really interested” feels very different from “just looking,” and it’s simple to get carried away by the new leather scent and bright devices during a test drive. However, choosing your first car should always be a sensible choice that you can live with easily.

Third, research your wheels

To avoid becoming indecisive the day you decide to head to the dealership, research your potential car extensively. If it is possible, have two or three options, especially if you are planning on buying a second-hand car from a used car sales dealership or private seller. Manage your expectations and stay ready. Remember to also keep all your car options within the budget you set out.

Fourth, talk to your financial services provider

If you don’t have cash to buy your car, you may be looking to get a loan or considering vehicle finance. That is another decision to be made whether a loan or vehicle finance will be what you use. Although the cost will depend on your credit score and the loan’s interest rate, a loan allows you to buy the vehicle altogether and can also be a cost-effective option. Vehicle financing operates a little differently because you don’t own the vehicle until the finance is fully repaid. The period is usually 72 months, with the option to pay it up should you want to. Vehicle finance has been a favourite among South African drivers due to its ability to cater for different income brackets, from luxury drivers to start-up businesses, offering opportunities for many new (and old) drivers to fulfil their goals.

Applying for online vehicle finance is easy, with the following being the basic requirements:

• Be over the age of 18;
• Be a South African citizen or foreign national with permanent residency.
• Have a valid driver’s licence.
• Earn at least R7 500 per month.

The required documents are:

• A copy of your valid ID document
• Proof of residential address (not older than 3 months)
• 3 months’ bank statements
• Proof of income (a recent payslip)

Fifth; consider balloon payment

A balloon payment is a lump sum principal balance paid towards the end of a loan term. Instead of paying down principal over the course of a loan, a balloon payment is an inflated one-time amount owed, usually after interest-only payments have been remitted over the life of the loan. However, deals are not all made equal. So, it’s crucial to keep in mind that choosing a longer repayment period or a balloon payment at the end of the term can lower your monthly premium but will ultimately cost you more. With a deposit, you might save more than R60 000 over the course of six years, or more than 30% of the car’s original price, by paying off a R200 000 car as quickly as possible.

Final words

Gather your research, get your papers ready, and count your budget. You should be well on your way to securing your wheels once these are aligned. Remember to stick to your budget and consider insurance. Your future self will thank you for it.