Before even entering a motor dealer you should have a good idea of what type of motor vehicle you want and what you can afford. Ask yourself the following questions: Should the car have air conditioning, power steering and ABS brakes? Do you need a sedan, bakkie or station wagon? Do you want a new or used motor vehicle? Keep in mind that used vehicles are cheaper because they have already depreciated in value whereas a new car still has a manufacturer’s warranty and poses a limited risk opposed to a used car.

How much can you afford?

Buy a vehicle that you can easily afford to pay on a monthly basis. Also take into account the repair and servicing of the car. Only buy a car of which you can comfortably afford to finance.

Deposit for the motor vehicle

It is not compulsory to put down a deposit for the car although it will reduce your monthly payments. You can either put down a cash deposit or trade in another vehicle. A general rule of thumb: The older the vehicle the bigger the deposit and the shorter the repayment term.

Vehicle finance options

There are two vehicle finance packages available: Lease Sale Agreements and Installment Sale Agreements.

Lease Sale Agreement

This agreement allows you to lease the vehicle from the financier with the option to purchase at the end of the agreement. The main advantages are you get to enjoy and use the vehicle without being the owner of it and the lease payments may be tax deductible. If you are self-employed or tax orientated this type of vehicle finance agreement is for you.

Installment Sale Agreement

With this type of agreement you purchase the vehicle from the dealer or the owner, but although you drive the vehicle every day the bank owns it until you have finished paying it off. You pay the bank monthly repayments for a specific period and only when you have paid the last installment you get ownership of the vehicle. The interest rate on the monthly repayments can be either fixed or variable and the maximum interest rate charged by the bank is governed by the National Credit Act.

Before making a final decision regarding the vehicle finance option and which vehicle finance company or bank to arrange finance through, it is advised to first shop to make sure you choose the best way to finance a vehicle. This is especially important if you want to trade in your current vehicle on the new purchase. Car dealers’ trade ins vary considerably depending on their stock level and their ability to sell your traded in vehicle.

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