Buying the next car can be quite challenging because there are so many things to consider. Should you use the cash you’ve spent years to save up, or should you arrange for a bank to finance the car? Let’s find out more.1
Paying cash for your car is not the end of the story1
Buying a car with your saved cash is one thing, but the dealership’s administrative fees and licence fees are also to consider. In addition, there are maintenance and fuel costs, and a monthly car insurance premium that must be included in your budget.
What about car financing?1
Before arranging for car finances, you need to determine how your monthly car instalments will fit your budget. This calculation will show you what kind of car you can afford to purchase. If the monthly instalments are too high, they can be lowered by paying over a longer-term. But, it will cost you more in fees and interest.
Obtaining car financing1
Especially in the current financial climate, banks are fussy to whom they lend money. They will look at your credit history and financial track record, and your income to ensure you can afford to buy the car. Banks will require a deposit, usually about 10% of the total car price. An advantage of the financing route is that banks take care of all the paperwork and payment to the seller.
What are the pros of paying cash?1
Cash is king when you can organise a lower price with a private seller or dealership. The other advantage is that you only need to concern yourself with the smaller costs of running a car. This makes your budget simpler to manage. Another pro is that you save much on not paying interest over 72 months. Remember that the car’s value depreciates enormously during its first year of ownership. Other advantages are that there are no more outstanding finances to deal with when you sell the car, and you also possess the title.
Make sure the car’s price is realistic1
Before making any cash payment, ensure that the car’s price is correct and not inflated. Then, when seeking finance, the banks will work out what the car’s price should be.
Disclaimer
Because car insurance is complicated, this article must only be seen as information. For the same reason, first, consult a certified financial advisor for professional advice before purchasing a car insurance product.
If you are going to pay cash for your new car, you should consider purchasing good cover such as comprehensive car insurance to protect yourself financially from unforeseen circumstances. In addition, if your bank is to finance your car, South African law requires that you take out comprehensive car insurance. Contact Prime South Africa, which offers affordable, comprehensive car insurance with fixed premiums and a reduce to zero excess* and other exceptional benefits in either case.
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