Crossovers, such as the Ford Puma, are the fastest-growing vehicle segment in the automotive world, replacing sedans, hatchbacks and small SUVs in many instances. With these vehicles being in demand, many of us will be looking at adding one to put garage; however, understanding the affordability of monthly car repayments is very important before we pull the trigger.
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Let's estimate your monthly repayments for a brand new Puma and explore ways to potentially lower them.
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Key factors that influence your monthly repayments
Before crunching numbers, let's figure out what the key factors are that determine your monthly car repayments:
- Purchase Price: The Puma's purchase price forms the basis for calculating your repayments. In this case, we'll be using the starting price of the entry-level Titanium, which retails from R570 400 at the time this article was published. (What's the best month to buy a car in SA?)
- Interest Rate: The interest rate is the cost that the lender charges for borrowing money. A lower interest rate translates to lower monthly repayments. Here's a breakdown of typical interest rates in South Africa:
- a) Prime Interest Rate: This is the benchmark rate offered to credit-worthy customers. The prime interest rate in South Africa is currently at 11.75%.
- b) Standard Interest Rate: If your credit score falls below the prime threshold, you can expect a higher interest rate, typically 13.75%.
- Loan Term: The loan term translates to your loan's duration, typically 24 to 72 months. Shorter loan terms mean higher monthly repayments but a faster debt payoff—in other words, less interest in the long run. Conversely, longer terms offer lower monthly payments but increase interest over time.
- Deposit/Trade-In Value: Putting down a larger deposit or trading in your existing car reduces the loan amount, significantly lowering your monthly repayments. Read the pros and cons of buying a car without a deposit.
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Using AutoTrader's Car Finance Calculator for estimates
Now that we understand how things work, let's put AutoTrader's car finance calculator to use to estimate your monthly repayments. Here's what you need to do.
1. Input the details:
- Purchase Price: Enter R 570 400
- Interest Rate: Enter 11.75% (if you qualify for the prime interest rate) or 13.75% (the standard interest rate).
- Loan Term: Choose your desired loan term (e.g., 60 months for a manageable monthly payment or 72 months for a lower but longer pay-off period).
- Deposit/Trade-In Value: Enter the amount of your deposit or the estimated trade-in value of your current car (if applicable).
2. Get your estimated repayment: The calculator will give you an estimated monthly repayment based on the information you entered, as well as how much interest you'll be paying and the total amount you will pay for the car if you finance it.
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Important considerations
- Estimated vs. Actual Rates: The car finance calculator offers a ballpark figure. The actual interest rate you qualify for and the final value your trade-in gets, will depend on your creditworthiness and the condition of the car you're trading in.
- Pre-Approval is Key: Getting pre-approved for a car loan from a bank or financial institution will give you a much more accurate picture of your interest rate and borrowing power.
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Saving on your monthly repayments
Apart from using a car finance calculator to estimate repayments, here are some additional ways to potentially save money:
- Negotiate the Purchase Price: Don't be afraid to negotiate the car's selling price with the dealership. A lower purchase price directly reduces the loan amount and your monthly repayments.
- Improve Your Credit Score: A higher credit score can qualify you for a lower interest rate, significantly reducing your monthly repayments. Make sure to settle your debts on time.
- Choose a Shorter Loan Term: While it means higher monthly payments, opting for a shorter loan term reduces the total interest paid over the life of the loan.
- Consider a Larger Deposit: Putting down a larger deposit lowers the loan amount you need to borrow, resulting in lower monthly repayments.
- Opting for Balloon payment: While it lowers your monthly repayment, ultimately, you're just making more debt in the long run, so we don't recommend it; hence, there are no example scenarios below that factor this in. This article explains why.
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Example Scenarios: Calculating monthly repayments for a Ford Puma
These examples use the following assumptions for the purchase price of a new Ford Puma Titanium:
- Current purchase price: R570 400
Scenario 1: Standard loan with no deposit and a standard interest rate:
- Interest Rate: 13.75% (standard interest rate for borrowers who don't qualify for prime)
- Loan Term: 60 months
- Deposit/Trade-In Value: R 0
- Estimated Monthly Repayment: With no down payment and a standard interest rate, expect a higher estimated monthly repayment, possibly around R13 191.
Scenario 2: A longer loan with a smaller deposit (and a standard interest rate):
- Interest Rate: 13.75% (standard interest rate)
- Loan Term: 72 months (longer loan term for a lower monthly payment)
- Deposit/Trade-In Value: R 100,000 (example of a trade-in value)
- Estimated Monthly Repayment: By putting down a R100 000 down payment and opting for a longer loan term, you might see a lower estimated monthly repayment, resulting in about R9 624. However, remember that a longer loan term means you'll pay more interest overall.
Scenario 3: Prime interest rate with a large deposit/trade in value:
- Interest Rate: 11.75% (prime interest rate for credit-worthy borrowers)
- Loan Term: 60 months
- Deposit/Trade-In Value: R 200 000
- Estimated Monthly Repayment: A larger deposit of R200 000 and potentially qualifying for the prime interest rate by negotiating the purchase price and/or having a good credit score could mean a lower estimated monthly repayment, possibly falling within the range of R8 186.
Important Note: Remember that these are just estimates and the actual interest rate you qualify for. Your final monthly repayment will depend on your creditworthiness, the final negotiated price of the car, and the value of your trade-in.
As you've noticed, we aren't fans of balloon payments. Read the pros and cons here
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