With the current recessive economic state, buying a car should not be a decision based on emotion; but rather one based on how much the purchase could affect your pocket overall – don’t just think initial capital layout, think long term too.
A car is a big purchase that could cost you anywhere from R25 000 for a used 10-year-old vehicle to over R1-million for a brand new top-end luxury car. Although these are extreme opposites, if you were to buy either one, or something closer to within your budget, we suggest that you conduct some thorough research first.
Remember, a vehicle is a liability with a value that decreases over time. In fact, from the moment you drive a new car off the showroom floor, it will have already lost 20% of its value.
Start off by asking yourself the first and most important question: Do I really need a new car? If you are spending money every month just to keep your car going, or you find yourself breaking down more often than you get to your destination, it may be time to look at a new vehicle.
Then ask yourself what will you be using the car for? Will you be going to work, parking and then going home with a bit of weekend travel? Will it be used as a business vehicle or as a mom’s taxi? Will you be driving it or will someone else be behind the wheel? These types of questions will help you determine what kind of vehicle is best suited to your needs.
When you are looking at buying a car, you also need to take the following into consideration:
- Overall amount: When you borrow money to buy your car, remember that interest adds a huge amount to the overall cost.
- Monthly repayments: Before you purchase that car that’s stolen your heart, ensure that the monthly instalments are well within your budget. It’s no good having a car you can’t put fuel into, or being unable to put food on the table. Also take the length of the term into account, i.e. how long it will take you to pay the car off as well whether the interest rate is fixed or fluctuates with the rate determined by the Reserve bank.
- Balloon or residual costs: In order to bring down monthly instalments, some financial institutions may add a balloon payment at the end of the loan term. This is a large lump sum that you would be expected to pay at the end of the term e.g. 5 years, in order to keep the vehicle. Your options are either paying this once-off, requesting refinancing or trading the vehicle in.
- Service costs: The cost of servicing a diesel-engine vehicle is generally higher than that of a petrol-powered one, but no matter what fuels your car, remember to ask an expert what the service costs would be and the interval of the services e.g. 10 000km or 15 000km as this will also directly affect your pocket.
In addition to services costs, also ask if there are any maintenance/motor plans for the vehicle, if not then investigate how you could purchase one. Some manufacturers insist that the vehicle is serviced by brand specific mechanics, while others only require Retail Motor Industry affiliation, – going against these requirements could void the warranty on your vehicle. We also suggest finding out if parts would need to be imported and if this would add to repair costs.
- Insurance costs: Some vehicles cost more to insure than others. Short term insurers base their premiums on factors such as performance, theft propensity and repair costs, as well as the driver’s history, where the car is parked and what it is used for. Before purchasing your car, find out how much it would cost to insure. Most financed cars have to be comprehensively insured.
- Fuel consumption: Smaller cars generally use less fuel than big fancy vehicles. If you do a lot of town travelling, then a car designed for stop-go traffic might suit you better than an SUV or high-performance car.
Whatever car you choose, whether you choose it because it looks pretty or provides good value for money, it will help your pocket if you drive it according to the manufacturers specifications, for example within optimal speed and gear, not riding the clutch, using the handbrake when necessary as this will prolong the life of your car, as well as keep repair costs to a minimum.