Get ready for car payment shocks

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Private buyers rarely take the trouble to collate financial data before walking on to a showroom floor.

Johannesburg - Finance minister Pravin Gordhan's 'tea and biscuits' budget and the end-of-January rate hike seem to have done little to prepare South African car buyers for the possibility of more interest-rate rises.

We see the continued slide in the value of the rand against the world's major currencies and we reason that the car we want will inevitably be more expensive a couple of months down the line - even locally-built cars have a large proportion of imported components that have to be paid for in dollars, euros or yen - so we mortgage our souls to buy it now while we can still afford it.

The problem with that is the monthly repayment we budgeted for can suddenly escalate if the Reserve Bank decides to bolster the rand by raising the prime rate two or even three times in a year. One of IOL's staffers very nearly lost his house when the bond repayment almost doubled between February 1987 and June 1988.

TAKING IT SERIOUSLY

Bidvest Bank, one of South Africa's leading vehicle finance providers, is taking the likelihood of significant rate hikes seriously enough that it has developed what it believes is the country's most comprehensive digital toolkit for working out the monthly repayments, running costs and even perks tax on a new car - not only at the current prime rate but at higher rates should there be more rises, as some economists predict.

It can tell you the repayment amounts over various periods at different interest rates, allowing for variable such as deposits and the term of the loan or lease deal.

It has tools to cover perks tax limitations, credit limits and the appropriate vehicle price range, and running costs - including one to factor in the rising cost of fuel.

Byron Corcoran, Bidvest Bank's head of fleet and asset finance, pointed out: "We regularly update the database to reflect changes to the petrol price and e-tolling, which makes the data an invaluable aid, especially when rates might be rising.

"The worry is that more customers don't use the service."

Private buyers rarely took the trouble to collate financial data before walking on to a showroom floor, he said, and it was rare for a customer to work out what would be the effect on the monthly repayment if interest rates were to rise.

Corcoran said: "Our reading of the situation following the end-of-January rate hike is that car-buyers are more concerned about the weak rand.

"They expect rand weakness to drive up vehicle prices, so they figure it makes sense to buy sooner rather than later - but it's also important to consider the interest rate climate.

"We want happy customers," he added, "not only when the deal is done, but months and years down the line.

"It makes sense to check that you can afford the payments at today's rate and then perhaps add a percentage point or two to see what the instalments might be in future.

"Smart buyers not only want the right car, they want the right deal."


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