Most people don’t have the cash to buy those shiny new wheels without financing. So, you’ve done your sums. Checked whether you can afford it and maybe you’ve even got a deposit to put down. Now it’s time to decide how to finance the vehicle – and, you’ve got a number of choices.
There are three options when it comes to financing a car. Each has advantages and disadvantages, depending on what you are looking for. Here are some guidelines to help you on your journey:
If, like most people, you’re going to go the Instalment Sale route, it’s worth doing your homework. Not all deals are created equal. The important thing to remember is that you can lower your monthly premium by taking a balloon payment at the end of the term, or taking a longer repayment term – but this will cost you more in the long run. Paying off a R200 000 car in the shortest amount of time, with a deposit, could save you more than R60 000 over 6 years – over 30% of the purchase price of the car.
The upside:
The downside:
Another type of financing is taking on a Full Maintenance Lease (FML). With an FML, you rent the vehicle for an agreed period. You pay a monthly fee, which covers all maintenance costs (including services, and those items that need to be regularly replaced because they wear out, like tyres, oil filters and wiper blades). At the end of the term, you hand back the car and, provided you’ve stuck to the terms of the agreement, you get a new one.
The upside:
The downside:
A ‘Guaranteed Buy-Back’ is where the bank and buyer agree on a value that the car can be ‘bought back’ for at the end of an agreed payment period.
The upside:
The downside:
Now go out there and choose wisely. Your financial health depends on it.