Affordable motor finance is available to anyone in South Africa wanting to purchase a car.
Not many people have piles of notes stashed away to pay for a new (or used) car with cash. Fortunately there are many finance options available. Which allow people to pay off vehicle installments (with interest of course!) rather than in one lump sum. In fact, financed vehicles account for 73% of all car purchases.
There’s a growing middle class in South Africa and figures that point to increasing year-by-year vehicle sales. There is also a growing market for insurance. Some motor finance schemes, however, seem more reasonable than they actually are.
When choosing affordable motor finance, it is important to do the maths. Work out how much interest you will actually be paying overall. Be sure to look for any hidden fees.
To help you make an informed choice, here are three ways to get affordable insurance on your vehicle.
Affordable Motor Finance Tip#1: A Good Deposit
Pay as much as you can upfront. Even if this will leave you a little short of cash for a month or so. A bigger deposit will save you money in the long run. It will reduce the overall interest you pay.
Using the same philosophy, work out an accurate budget. Be sure to use as much as you can allocate to your car repayment. Paying off the car with larger installments means that you are debt-free sooner. Paying less interest on your vehicle over time.
Calculate the total interest payments. Multiply the amount you pay per month by the number of months you will be paying for the car. You can then compare this amount to the book price of the vehicle. The total amount minus the book value of the vehicle is approximately the amount of interest you will be paying. The value of your car decreases over time. But the amount of interest you are paying remains the same. You are paying even more interest compared to the car’s value.
A good figure to aim for when putting down a down payment is 20% of the total vehicle value. This will help you save on interest costs.
Tip #2: Understand your Credit History
It is important to know your credit score. This will affect the ease with which you will get vehicle finance. As well as the type of financing you will be eligible for. Even if you think you have an excellent credit record, it is in your best interest to find out where you score will put you on the interest scale.
If you do have bad credit… It is better to be armed with that knowledge when trying to negotiate with your lender.
Tip #3: Do Some Shopping
Shop around for vehicle financing options. Don’t just settle for the first quote you come across. Be sure to do your research and get as many quote and plans as you can before making a decision.
The first step in the process is budgeting: how much can you afford to pay per month? If you don’t have much room for vehicle insurance installments then choose a cheaper car. To avoid paying off the car over a long period of time and incurring high interest charges.
Take your income and factor in all other monthly expenses. Whatever you are left with or more or less what you would be able to spend in the month.(Although some money should be left for miscellaneous expenses).
Many dealerships offer vehicle finance, as well as banks and other financial institutions. Make sure that the lenders you approach are certified and avoid private loan sharks who charge exorbitant interest rates.
Remember that dealerships are not financial institutions. Meaning that they are a middleman and are often actually using another lender and charging their own interest on top of the interest charged by the financial institution.
Some dealerships offer specials such as 0% financing. This usually only applied if you have an excellent credit rating and can pay a larger down payment upfront. The special of 0% financing doesn’t usually apply to longer payment plans.
When in doubt, approach an independent financial advisor who will be able to help you investigate your options. Spending a small amount on a consulting fee can save you a lot of money spent on interest over time.