A low car instalment can look like a good deal. However, the advertised amount is often only one part of the total monthly cost.
Once you add insurance, vehicle tracking, licence fees and finance charges, the amount you pay can increase quickly. Some finance deals also include a large balloon payment at the end.
For this reason, rent to buy cars can offer a clearer and more practical way to get a reliable vehicle.
With Earn a Car, several important vehicle costs are included in one monthly payment. You can also work towards owning the car without applying for traditional bank finance.
How Rent to Buy Cars Work
Rent to buy is a vehicle subscription agreement.
Instead of borrowing money from a bank, you use the vehicle while making monthly payments over an agreed term.
Once you have completed the required payments and met all the agreement conditions, you may have the option to purchase the vehicle for R100.
Therefore, rent to buy gives qualifying customers a simple route towards possible vehicle ownership.
The True Cost of a Car Instalment
Finance adverts normally focus on the monthly instalment. However, you may still need to pay separately for:
- Comprehensive insurance
- Vehicle tracking
- Annual licence renewal
- Monthly finance fees
- A balloon payment
As a result, the cheapest advertised instalment may not provide the best overall value.
To show the difference, let us compare the cost of financing a Renault Kwid with getting one through Earn a Car.
Renault Kwid: Finance or Rent to Buy?
A Renault Kwid is available through Earn a Car from R4,999 per month.
The monthly payment includes:
- Theft and damage cover
- Vehicle tracking
- Annual licensing
A new Renault Kwid may be advertised on finance from R2,499 per month. However, that finance deal runs for 72 months and includes a 40% balloon payment.
The table below looks beyond the advertised instalment.
| Cost | Traditional car finance | Earn a Car rent to buy |
|---|---|---|
| Monthly vehicle payment | R2,499 | R4,999 |
| Insurance or theft and damage cover | Approximately R1,086 | Included |
| Vehicle tracking | From approximately R99 | Included |
| Annual licensing | Approximately R500 per year | Included |
| Monthly finance service fee | R69.08 | No separate finance fee |
| Estimated monthly outflow | Approximately R3,795 | R4,999 |
| Payment period | 72 months | 60 payments |
| Balloon payment | Approximately R71,520 | None |
| Estimated cost over the full term | Approximately R343,450 | Approximately R300,040 |
| End-of-term payment | Balloon must be settled | R100 purchase option* |
*The R100 purchase option is subject to all required payments being completed and all agreement conditions being met.
Insurance costs will differ between customers. Your age, location, driving history and risk profile can all affect the premium.
Tracking and licence fees may also differ. Therefore, the figures above are estimates. Nevertheless, the comparison shows why you should consider the full cost of a car instead of only the advertised instalment.
The Longer Term Can Cost You More
The financed Renault Kwid appears cheaper each month. However, the agreement continues for 72 months.
The Earn a Car option in this example requires 60 payments. Therefore, the finance customer may still be paying for the car for an extra 12 months.
During that additional year, the customer may also need to continue paying insurance, tracking and annual licensing.
Over the full agreement period, these costs can make finance more expensive.
Balloon Payments Delay the Cost
A balloon payment reduces the monthly finance instalment. However, it does not remove the amount that you owe.
Instead, part of the vehicle price is moved to the end of the finance agreement.
In this example, the estimated balloon payment is approximately R71,520. The customer must pay, refinance or settle that amount before fully owning the car.
With Earn a Car, there is no large balloon payment at the end.
After completing the required payments and meeting the agreement conditions, a qualifying customer may purchase the vehicle for R100.
One Monthly Vehicle Payment
Traditional finance often means dealing with several different service providers.
You pay the bank for the vehicle. You pay an insurer for comprehensive insurance. You may also pay a tracking company and renew the vehicle licence separately.
In contrast, Earn a Car includes theft and damage cover, tracking and annual licensing in the monthly payment.
Therefore, you have one main vehicle cost to plan for.
This makes your monthly budget easier to understand and manage.
An Option for People with Credit Challenges
Getting approved for vehicle finance can be difficult if you have a low credit score or a poor credit history.
Banks may decline an application because of missed payments, existing debt or debt review.
However, rent to buy cars use a different application process.
Earn a Car considers applications from people who may not qualify for traditional vehicle finance. Approval is still subject to affordability, income and the required supporting documents.
Even so, previous credit problems do not automatically stop you from applying.
Why Earn a Car Offers Better Value
A financed vehicle may have a lower advertised instalment. However, the instalment does not include every cost.
Earn a Car gives qualifying customers:
- One predictable monthly payment
- Theft and damage cover
- Vehicle tracking
- Annual licensing
- No large balloon payment
- A shorter payment period in this example
- A possible R100 purchase option
- An alternative to bank finance
In the Renault Kwid comparison, the estimated cost of traditional finance reaches approximately R343,450 over 72 months.
Meanwhile, the Earn a Car option comes to approximately R300,040 over 60 payments, including the R100 purchase amount.
That is an estimated saving of more than R43,000.
Start Your Journey Towards Car Ownership
The lowest monthly instalment is not always the cheapest way to get a car.
Once you include insurance, tracking, licence fees and a balloon payment, traditional finance can cost much more than expected.
With predictable payments and important vehicle costs already included, rent to buy cars offer a clearer way forward.
View the available vehicles on Earn a Car and apply online to find out whether you qualify.