Ten tips when buy­ing a car this year

Weekend Witness - - Money -

FOR most peo­ple, a New Year means a fresh start and a set of res­o­lu­tions. If one of your res­o­lu­tions this year is to be­come more mo­bile, or per­haps to help a fam­ily mem­ber be­come more mo­bile, and you are think­ing of buy­ing a car, don’t let this be­come one of the “res­o­lu­tions that got away”.

Chris De Kock, ex­ec­u­tive head of sales and mar­ket­ing at Wes­Bank, has 10 tips to keep in mind when buy­ing ei­ther a new or pre-owned car.

Al­ways buy from a rep­utable deal­er­ship. You will be as­sured of the best pos­si­ble ser­vice and this will also help to safe­guard you from buy­ing the prover­bial “lemon”.

Fit for pur­pose. Buy­ing a car should be based on the prac­ti­cal use that your ve­hi­cle is in­tended for. Pay spe­cial at­ten­tion to the av­er­age mileage you travel per month and the car’s fuel ef­fi­ciency. Con­sider whether to buy a petrol or diesel ve­hi­cle, in light of the ever-es­ca­lat­ing cost of fuel.

To­tal cost of own­er­ship. You should not base your af­ford­abil­ity cal­cu­la­tion only on the re­pay­ment of the in­stal­ment. Wes­Bank’s re­search has shown that in the cur­rent mar­ket con­di­tions, the ac­tual monthly in­stal­ment of an en­trylevel car ac­counts for less than 50% of the to­tal cost of own­er­ship. Prospec­tive buy­ers should also bud­get for fuel, main­te­nance and in­surance be­fore de­cid­ing to buy a new car.

Buy­ing a new or used car? A used car ap­pears cheaper than the com­pa­ra­ble new car, but over the long term, the cost of main­tain­ing a used car will add up. In con­trast, most new cars come with main­te­nance or ser­vice plans. Hav­ing a main­te­nance plan also of­fers peace of mind that you won’t have any out-of-bud­get ex­penses to main­tain the car. De­pend­ing on where you buy your pre-owned ve­hi­cle, you can have the op­tion of pur­chas­ing a main­te­nance or ser­vice plan.

Fixed or linked in­ter­est rate. Usu­ally, when in­ter­est rates are low, most cus­tomers opt to use a fixed in­ter­est rate, which sets the rate for the du­ra­tion of the con­tract. On the other hand, when in­ter­est rates are high, most cus­tomers opt for linked in­ter­est rates, mean­ing that the rate of in­ter­est paid on the ve­hi­cle ev­ery month will be linked to the prime rate, in the hope that the prime in­ter­est rate would move down over the du­ra­tion of the con­tract, which would in turn also re­duce the monthly re­pay­ment. You would need to take care when de­cid­ing on a fixed or linked in­ter­est rate, be­cause once you have made your se­lec­tion and signed the con­tract, the op­tion of fixed or linked is set for the du­ra­tion of your con­tract.

The re­pay­ment pe­riod. De­cid­ing on the re­pay­ment pe­riod is im­por­tant. Choos­ing a longer pe­riod re­duces the monthly in­stal­ment and this may ini­tially ap­pear at­trac­tive, but it ac­crues more in­ter­est. In ad­di­tion, the longer the pe­riod over which the car is fi­nanced, the longer it will take for the set­tle­ment value to reach break-even point with the as­set value be­cause of de­pre­ci­a­tion. In short, this means that it will take longer be­fore you can trade in your car.

Paying a de­posit. Paying a de­posit has mul­ti­ple ben­e­fits: it re­sults in a smaller monthly in­stal­ment and also al­lows you to fi­nance the car over a shorter pe­riod. This means that if you so choose, you can trade the car in sooner.

A bal­loon pay­ment or not? A bal­loon pay­ment is an in­flated fi­nal in­stal­ment which is agreed upon up­front. It al­lows you to pay re­duced monthly in­stal­ments but re­sults in the pre­vi­ously men­tioned break-even point to be sig­nif­i­cantly ex­tended. We also find that cus­tomers some­times tend to for­get about the in­flated amount at the end of the con­tract, which can then be a nasty sur­prise.

Value-added prod­ucts. There are a num­ber of value-added in­surance prod­ucts to choose from. There are prod­ucts re­lat­ing to the car it­self, for ex­am­ple ser­vice or main­te­nance plans, tyre in­sur- ance and dent-and-scratch pro­tec­tion. There is also short­fall cover, which pro­tects you in cases where your in­surance does not pay your claim in full. There are also var­i­ous per­sonal in­surance prod­ucts such as life, dis­abil­ity and un­em­ploy­ment cover. Hav­ing a thor­ough dis­cus­sion with a fi­nance and in­surance spe­cial­ist will help you make the most in­formed de­ci­sions.

Thor­ough re­search. Par­tic­u­larly in the cur­rent econ­omy, buy­ing a car should be a thor­oughly re­searched and prac­ti­cal en­deav­our. The fi­nance and in­surance spe­cial­ist on the dealer floor is there to as­sist and guide you in mak­ing the most in­formed de­ci­sion. Re­mem­ber that when ap­ply­ing for fi­nance, you need to take a num­ber of doc­u­ments with you, ac­cord­ing to the re­quire­ments of the Fi­nan­cial In­tel­li­gence Cen­tre Act (Fica). Th­ese in­clude your ID, driver’s li­cence, payslip and proof of res­i­dence. If your salary is com­mis­sion-based you need to take at least six months’ bank state­ments.

— WWR.

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