Buying your first car

Written by Your Future Now

Due to the lack of a proper public transport system in South Africa, a lot of South Africans have no other choice but to rely on cars as a way of getting from Point A to Point B. Our government is encouraging the use of public transport with initiatives like exempting public transport from e-toll fees, but existing public transport methods are either unsafe, limited to metro areas or not integrated enough – Point A to Point B simply has too many switch-overs and climb-overs.

When taking this huge step, some consider buying your first car to be the second most important purchase of your life, you need to do proper research before obliviously walk into a second hand dealership where an over-friendly, bad-suit-wearing salesman awaits its prey. Without proper research, you will be a sitting duck.

When buying your first car, you need to identify your needs first (and if your bank account can meet those needs). Are you looking for a family car or a practical car? Something safe or something fast? Considering the ever changing fuel prices, maybe a car that is the most fuel efficient in its class? A new car or a used car? Your budget will probably answer some of these answers for you – which isn’t necessarily a bad thing.

A lot of first time buyers, some even make this mistake more than once, simply look at the monthly instalment price when buying a car. You really should be looking at all the other expenses as well. These expenses range from monthly insurance, the cost of services, the cost and availability of parts – stay away from French cars – as well as the cost of tyres. Your monthly car budget should include all of these costs. I’m not saying your car will be serviced every month or that you will be replacing four new tyres every month. If you are buying a second-hand car, and you really should, you need to consider having emergency car savings that can be used towards wear-and-tear, tyres and services. Your car-buying journey shouldn’t start in the showroom, but rather with your budget. The total monthly repayment on your car, including the above mentioned expenses, should not exceed 20% of your of your take-home pay.

Once you’ve narrowed down your choices to three cars, request quotes from different insurance companies to make sure you get the best deal possible. Your insurance will be affected by a lot of different factors. You don’t have control over some of these factors – like your age, gender, driving activity and history – but your car of choice can influence your monthly insurance instalment. The size, age and safety rating of your car can inflate your instalment or vice versa.

As a first time buyer, if you choose to finance your car through a bank, you will be paying a higher interest rate. This is probably because you don’t have a solid credit rating – having no credit rating influences our ability to qualify for a credit facility just as much as a bad credit rating would. Your interest rate will also be affected by your total deposit amount and the contract period. A bigger deposit will reduce your monthly repayment as well as the interest on the transaction. A longer contract period will also reduce your monthly repayment but on the other hand will increase the interest amount. It goes without saying that saving up enough money for a fat deposit is an essential part of the car buying process. Some garages will offer you a residual option, better known as a balloon payment. Like with the French cars, this is an option that I would strongly advise against taking. A balloon payment is an agreed inflated final payment of the loan that is payable in full at the end of the loan agreement. A balloon payment might seem very lucrative because it reduces your monthly repayment but at the end of your contract term a nasty surprise awaits you. Another thing to keep an eye out for is the licence and registration fee charge by the dealership. Talking about licencing, did you think about your annual car licence renewal fee? Things are adding up, aren’t they?

You’ve done proper research, now you are ready to visit a dealership. When buying a second hand car, it is important to buy a car that is reliable and has a full services history. Usually with used cars, you don’t really know what you are buying until you’ve actually bought it. Yes, you can test drive the vehicle and study the service history as much as you like – only at a later stage will you know if you bought a cat in the bag. Surprises can be limited by requesting the vehicle’s VIN number from the dealership. You can use the VIN number to find out which parts have been ordered in the past for the specific car you are interested in. Some used cars might come with a balance of warranty and/or motor plan. This can be quite beneficial as you want be charged for services and most major mechanical components will be covered until this warranty and motor plan expires. Some dealerships might even be able to offer you an extension on the service plan at a price. This can be financed on top of your lease agreement.

To summarise, do proper research before visiting a dealership. A used car should be your first option – look for a reliable model with lower mileage that possibly has a balance of motor plan or warranty still in place. Sporty, faster cars will see you paying more for your insurance, save that for when you are older. Opt for a car that is fuel efficient and cheap to maintain, especially if it doesn’t come with the above mentioned motor plan or warranty. The most important part of your car buying journey is your happiness when you drive out of the dealership in your new baby. Not just happy with your car of choice, but also happy with the terms and conditions of the signed agreement.

Article Categories:
Life Events · Saving and Spending

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