What you should know when buying a car
Here are a few fast facts to help graduates and first-time car buyers understand the ins and outs of making long-term purchase agreements.
Used or new?
There are advantages to both new and used cars. For example - a new car comes with no prior history. You will be in full control of how well it’s driven and maintained. You will have options such as maintenance plans and warranties from the manufacturer – a definite plus for managing costs and risk.
Used cars, on the other hand, already have a history. It helps a lot if the previous owner kept a detailed service history. Make sure you ask the seller about any issues with the car or if it has been in an accident. You should be able to tell from the state of the car whether it’s been well looked after or not.
Choose a reputable dealership
Buying through a reputable dealer, such as a dealership that is approved by WesBank, does come with peace of mind. The dealership environment is professional and safe and there are people to guide and help you with all the admin, which can be a bit daunting. The dealer is responsible for making sure the cars on their floor are in good shape, not stolen and don’t have any outstanding debt attached to them. Reputable dealerships have inspection reports for their cars. Ask to see it. Also ask the dealer if they offer any guarantees and get all the facts around this in writing.
What is a credit score?
A credit score refers to the way you handle your payments for clothing accounts or a student loan shared with the credit bureaus. Financial institutions then use this information to gauge whether you’re going to be a responsible candidate to lend money to.
The finance period is the length of time you have to pay off your car. The length of the finance period affects your instalment amount and how much interest you pay. Paying off your car over a longer period can be tempting, because it reduces your monthly instalments and that looks great on your budget, but you end up paying more interest in total so your car will cost you more. If you can comfortably manage to pay off your car over a shorter period you will be paying less interest in total and that could definitely be better for you in the long run.
Balloons should be approached with caution when it comes to your car finance agreement. A balloon payment is an amount that needs to be paid as a lump sum at the end of a vehicle finance contract. It can be tempting because at the time of getting your car, adding a balloon payment can reduce your monthly instalments, but don’t be naive. Think long term. The balloon payment means that you are not only paying more interest in total, it will be back to haunt you at the end of your finance agreement, and that can be a shocker.
Total cost of car ownership
There’s a lot more to the cost of owning a car than simply paying your monthly instalments on time. You also need to budget for the cost of keeping it running. You will also need to account for expenses like fuel, insurance, servicing, tyres, tolls and speeding fines. Don’t over-extend yourself by going for a car that has monthly instalments you can only just afford. The other costs will catch up with you sooner than you think.