Don’t get taken for a ride – Find the best car loan to suit you.
August 29, 2017
What are the best car loans available in South Africa? There are many ways to finance buying a car in South Africa. Many people do not realise that a bank or finance house will provide loans for cars.
Some points to guide you –
- Understand the terms before signing a loan agreement
- Always chose the shortest repayment period you can afford
- Try to put down as large a deposit as possible
- Steer clear of “Balloon Payments”
- Always buy a car within your financial means
- Interest rates are cheaper when buying through a dealer as opposed to a bank.
The best Car loans are the Loans you Can afford
Wesbank is a name synonymous with vehicle financing and the company gives this advice when buying –
Ask questions at the dealership
- Finance and Insurance (F&I) reps guide you through the contract when buying at a dealership. Don’t rush into signing a contract without clearly understanding all the clauses involved with the sale.
- You have two options when buying – Fixed or Linked interest rates. Understand the difference.
- A Fixed interest rate remains unchanged throughout the life of the contract, whereas a Linked interest rate can go up or down whenever the Reserve Bank changes the repo rate.
- Carefully select the repayment periods. This can be over a period of one to six years. Remember, longer periods push up the interest and monthly fees.
- Put down the biggest deposit possible to save on interest payments and to lower monthly installments.
- Apart from the cost of the car, extras include admin, licensing and delivery fees.
- Optional extras could include a service warranty.
- More extras are insurance products to refund deposits in the event of major accident or theft. As well as gap cover that settles the outstanding bank loan should the cover not pay the full outstanding amount.
- Comprehensive insurance is compulsory when getting a car loan and remains in force for the entire contract period. You can buy this privately or through the dealer.
- Balloon Payments offer lower monthly installments, however, there is a settlement figure payable at the end of the contract. In many cases, naive buyers will end up getting a further loan to settle the outstanding amount.
From the above, it’s clear that buyers must do their homework before rushing into a deal.
Best car Loans and The importance of Budgeting
Don’t be determined to pursue your dream car where the monthly payment can break your budget. Before driving away in that luxury vehicle consider other choices. A budget should include cash-on-hand for unforeseen expenses and for the rise in the cost of maintenance, repairs, and fuel.
Luxury car Financing
Luxury car dealerships like Mercedes-Benz offer clients a different form of finance that allows them to drive away in a new vehicle every three years. Repayments are lower than what can be offered with traditional vehicle finance.
Known as Agility Finance, cars are returned after 36 months at a value guaranteed at the start of the contract. The customer then selects a new vehicle and the agreement continues for another three-year term.
Best car Loans and Obtaining a Private loan
There are several South African firms that offer loans to private vehicle buyers. Among these is Carfin that offers buyers two options:
- Standard Hire Purchase (HP) Agreement
- Residual Purchase financing
HP agreements are linked to prime interest rates for a fixed contract period. Once the loan is fully repaid, the buyer retains ownership of the vehicle.
A Residual Purchase offers buyers a lower monthly instalment, but this is actually a Balloon Payment in which a percentage of the original loan must be repaid at the end of the contract.
Best car Loans – Financing through Banks
Wesbank is a name linked with vehicle financing. The company is a division of FirstRand Bank and one of the biggest credit financiers in South Africa. With Wesbank, purchases can be made through dealerships or privately.
Other banks which will finance the purchase of a vehicle include Standard and First National.
Aspects to consider before buying –
- What can you afford?
- Fuel choices
- Why do you need a vehicle?
- Safety considerations
- Must you sell your current vehicle?
- Affordability should be high on the priority list when buying a vehicle.
It is not only monthly instalments that must be repaid but also ever-rising fuel, maintenance and insurance costs. So, avoid buying a “gas guzzler”, diesel costs less.
A car must be bought to suit the needs of the driver. For example, a sales rep would be better off buying a low mileage vehicle with air conditioning. This would not apply to someone looking for a run-around to the local shops. Safety is another consideration, some vehicles are more likely to be stolen or hijacked.
People seeking car finance and who need to sell their current car should find themselves a buyer before signing a car loan contract. This will avoid the possibility of selling the vehicle for less money than expected.
Raising any form of loan requires serious consideration. However, most South Africans do not have the cash-on-hand to purchase a vehicle outright so have to resort to the loan financing option. Investigate all aspects of the loan required and opt for the one that gives the best rates but includes the necessary cover to maintain the vehicle throughout the life of the contract.
Spending a little time doing research online will save buyers a lot of money and avoid unforeseen financial shocks.
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All info was correct at time of publishing