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How to plan for your vehicle purchase
Senior Member

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Buying a car is a major decision and, next to a house, it’s probably one of the most expensive purchases you will ever make. That’s why it’s important that you do your financial ‘homework’ before you sign on the dotted line for your new wheels.


Below, we outline the things you need to think about before you go ahead and buy your dream car, and also how to control and reduce your monthly payments once you’re in the driver’s seat.


Three things to consider before buying a vehicle:


  1. The total cost of ownership: Beyond the overall purchase price, a car must be maintained and insured. It’s a good idea to take a critical look at your monthly budget to work out if you can afford your normal expenses, plus your car’s instalments, its insurance costs and the occasional service. If not, it may be a case of rooting out areas where you can cut back, or finding a car with a more economical price tag.
  2. The service or maintenance plan: Find out exactly what is covered by your car’s maintenance plan or insurance. If anything is left out, you may need to save for possible surprises, or uncooperative brake pads, for example, could eat into a huge chunk of your income.
  3. The cost of insurance: Avoid going for a higher excess payment to reduce monthly premiums, as you could find yourself with a more expensive bill before the car is even touched by a panel beater.


Seven ways to reduce your monthly payment:


  1. Try to put down the biggest deposit you can. The higher the deposit, the less you will have to pay back and the less interest you will pay.
  2. Consider setting aside the equivalent of the new car’s payment for several months. This will give you an idea of whether you can afford the car. If this goes well, you can use the money you have saved for a deposit
  3. Avoid buying a car with a high residual or balloon payment requirement. Though your monthly instalments will be more affordable, you may find yourself owing a large lump sum at the end of the repayment term.
  4. Prepare for increased interest rates. Use spare cash to add to your vehicle’s monthly payment.
  5. Ask your bank if it offers car loans at a fixed interest rate. This could cost you about 2% above the going rate, but will provide financial certainty.
  6. Think about leasing a vehicle with the option of retaining ownership at the end of the contract. There are various types of leases, including full maintenance leases. This may cost more, but will cover all expenses for a set monthly price.
  7. Ask your dealer or bank to calculate the costs of various repayment options. The difference between instalments over various payment periods can be fairly low, so you could save yourself months of repayments and interest costs.


Though the information above will go far in helping you purchase a car in any economy, the best advice is always to make sure that you don’t spend more than you can afford.


For more help or information in the area of vehicle purchases, please visit our website.