Buying a car is not as easy, especially when many motorists are financially strapped during the South African pandemic. It is essential to ensure you fully understand the entire process before signing, putting the excitement of buying a new car aside. Please read on further about some valuable tips.1,2
A finance and insurance (F&I) representative1
Each dealership has an F&I representative especially appointed to explain the entire financial process to you. Registered with the National Credit Regulator, the representative is fully qualified to provide you with the correct financial advice.
Make sure you understand1,2
The representative has a list of items he must take you through to ensure you understand what you’re letting yourself in for regarding buying a new vehicle. But he won’t know about any other points you don’t understand unless you ask him to clarify. As an extra precaution, read all the necessary documents beforehand and write down any questions you may have. Seeing this is your last chance with the representative before signing, you don’t want to have any regrets later.
Don’t rush1
You may be tempted to rush with all the excitement and ask, ‘Where can I sign? Avoid rushing so that the process followed is sound and correct.
What is a linked or fixed interest rate?1
It’s important to know what implications these two choices have on your budget. For example, you may initially pay more with a fixed interest rate, but as interest rates rise, you start to gain. Conversely, with the linked interest rate, you may initially save when the interest rate is low, but when the Reserve Bank increases rates, so will your monthly payments.
How long should the contract period be?1
A contract can range from 12 months to 72 months. The longer the contract period, the less the monthly instalments will be, but the more you end up paying in fees and interest.
Reduce your interest with a large deposit1
The more cash you can initially deposit, the less your interest and monthly instalments will be less.
Beware of a balloon payment1
A balloon payment is a lump sum that you will still owe after you’ve paid off the contract. The bank makes this payment available to render the initial instalments lower and easier to manage. First, determine exactly how much your balloon payment will be at the end of the contract. Then, try and save up for this amount. Otherwise, you will have to take out another contract to pay off the balloon amount when the first contract ends.
Must you take out comprehensive car insurance?1,2
Another crucial document you will have to sign is a comprehensive car insurance contract. This is a legal requirement if your car is to be financed by any South African financial institution. Perhaps contact Prime South Africa who offer affordable, comprehensive car insurance with excellent benefits like fixed premiums*, a reduce to zero excess* and more. Why not contact Prime for a car insurance quote? T and Cs apply.
Disclaimer
Car insurance is a complex matter and that is why this article can only provide information. Make sure to first contact a certified financial advisor for professional advice before purchasing any car insurance product.
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