If you haven't been able to put money away for a deposit, the short answer is yes, you can still buy a car and a financial institute will be glad to assist you if you hold a steady job and have a good credit score. The only problem is that your monthly repayment will be considerably higher and you'll pay much more interest. This makes it all very tempting to opt for a balloon payment, but then you're left with mammoth-sized debt at the end of the term if you want to make the car yours for good. Many people end up at the bottom of the balloon-payment pitfall and regret committing themselves to this type of deal in the first place.
To illustrate how much of a difference a deposit can make, we employed our Car Finance Calculator.
Let's say you are in the market for a used car, priced at R100 000 (see below). If you put down a deposit of R50k, your monthly repayment will be an affordable R914 per month over 72 months, based on a 9.5% interest rate. The total interest is R15 789.
Should you not have any deposit, your monthly repayment is R1 827 and total interest paid over 72 months amounts to R31 578, more than 30% of the total cost of your car (see below). Then you haven't even factored in running costs and insurance.
Nope, that's way too pricey. What else can I do?
Did you know that there is another option called car leasing? If you are a sensible, defensive driver (ie. not prone to regular fender-benders) who takes special care of a car, inside and out, this option may be right for you. We say this because the car has to be in perfect shape when you return it, or you may have to pay pricey penalties.
We suggest you read more about it here in this article namely Car finance options explained: Car leasing. It also highlights the differences as well as pros and cons of buying vs. leasing a car.
