DURBAN - Buying a new car can be a daunting task and then there are many issues related to purchasing the car including car insurance, financing the vehicle and finding the right deal.
Here are some tips to remember when buying a new car that according to WesBank will help you feel confident about buying a car.
Start with a budget:
The key idea to remember when buying a car is affordability and if you can buy that car. Your budget can be determined by the amount of money that you have saved or you can finance your by taking out a loan. Around 65% of South African seek financing when buying a new car.
Loans are paid off in monthly installments so the larger the loan the higher the monthly payment. Draw up a budget if you can pay the monthly installment along with your other expenses.This will give an idea of how much money is coming in, what expenses are going out and what you have left over.
This relates to how much you can afford to spend and the amount of money you can spend on a monthly installment. An example would be if you had R4 000 left over after the expenses have been deducted. It does that mean you can buy a car that has a monthly installment of R4 000 but rather that R4 000 should cover other car expenses like insurance, maintenance, fuel and any other unexpected expense.
The budget should be one that looks over five or six years to incorporate rising fuel costs and other expenses like tyres that need to be changed.
Insurance is important for all car owners whether the car is financed or not. If the car the financed, active comprehensive insurance is a contractual requirement. If you are involved in a car accident the car insurance will pay for the the damages incurred. If the repairs to the car are too expensive and uneconomical to repair the car will be a write off.
If the car is stolen the car insurance will pay off the the remaining amount of the loan. This means that tha the buyer does not have to fret over expensive car payments or paying for a loan for a car that you can not drive.
Deal or no deal:
It is important to find the right deal one that is perfect for the buyer. Once you know what you can afford for each month including any other extra costs then you can use a purchase price calculator to work out the loan amount that is in your budget range. You might not be eligible for the amount that you want but you will get a good idea the price range that you can shop in.
Once you know how much you can spend you can start looking for cars but keep in mind practical questions to ask yourself during the process. The questions can be what car safety features work for me, is the car fuel economical and does the car have a service or maintenance plan.
Apply to qualify:
This is to apply for vehicle financing that can be done through your bank or done with the assistance of the car dealership. The process of applying involves supplying documents like pay slips and bank statements so the the bank can work out of you can afford. Having a budget and knowing the that you are applying for finance that you can afford comes in handy.
When applying for finance you must have a valid driver’s license and proof of address fro FICA purposes.
Rely on F&I:
This is Finance and Insurance whose main purpose is to help and inform buyers and can be helpful when there are terms that are unknown, products on offer or conditions. The F&I is regulated by the Financial Advisory and Intermediary Services (FAIS) Act and the National Credit Act (NCA), which means they are required to give you advice that is financially sound and to explain what you can and cannot afford.
Structure your contract:
Due to the NCA, banks have made it possible to structure your finance contract according to your affordability. Which mean that you can choose the contract term, the type of interest rate you want, whether you want to pay a deposit and if you would like to use a balloon payment.
Contract terms refers to the period over which the loan has to be paid off and the period can between 12 to 72 months.
There are two types of interest rates available to consumers which is fixed and linked interest. Fixed interest is rate will a bit higher than the linked rate but the fixed rate will not change during the period of the loan. The linked rate will fluctuate according to the changes in interest rates at the reserve bank.
Value added extras:
When structuring the contract ensure that you can add extras like tinted windows or value added finance products like paint and dent protection packages to maintain the car. Also available are financial assistance products that assist in protecting your budget in case of death or theft.
Count other costs:
Beware of the hidden costs when drawing up your budget. Some of the hidden costs are licensing and registration. Other hidden costs can be with the dealership that will charge extra for car preparation or delivering the car.
However these costs need to be explained by the F&I and the dealership. You can inquire about the all the costs listed on the final invoice. It is better to pay for the hidden costs cash rather than including them in your finance plan to ensure that your monthly installment stays low.
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