First-time car buyer? What you need to know
First-time car buyer? What you need to know
By Ané Theron
So, you’ve inherited your mother or brother’s old skedonk, but you feel it’s time to buy a car to better suit your image. Or perhaps your spouse has recently passed away, and you plan on buying a small city runabout for you, that will fit the grandkids too. Here are a few things you should be aware of before making this giant leap.
Don’t make debt just yet
In short, should you drive that older car until its wheels come off? Driving that fully paid-up car for as long as you possibly can (if it’s still safe and reliable) means you can save your money to put down a larger deposit on a new car - and not some small and unsafe little thing with no ABS or airbags.
Identify your needs
First-time car buyers aren’t necessarily students - many young moms and young professionals or newly-divorced folk only buy that very first car (in their own name) much later on life. Knowing what your needs are will help you to find a car that will suit your lifestyle as well as your budget. Will you be driving kids around? Are you going to drive mostly in town or beyond? Do you need space for sports equipment? Also bear in mind that your choice of car will also influence how much your monthly car insurance payment will be. A sensible, mid-power car will cost you less than a sporty number with a very powerful engine. Click here to read about how you can bring down your insurance premium.
Should I buy a new or a used car?
The number of reliable, used cars that can be bought for the same money as a new entry-level Polo Vivo hatch, is staggering. But, as always, it pays to be careful what you buy. A 10-year-old BMW 750i might seem like a steal at only R150 000 (as an example), but remember that it’s a complicated car with lots of intricate parts - and when it does go wrong, it will cost you a fortune to repair.
Your best bet would be to rather look for a low-mileage, late-model car, slightly upmarket from what you can afford to buy new. For instance, you could get a 3-year-old Nissan Qashqai with about 60 000 km for less than you’d pay for a basic new Vivo, and it’s fair to say that the older Qashqai is a far nicer vehicle than a bare-bones Vivo. The same applies as you move further up (or down) the price scale. In short, don’t limit yourself to either a new or pre-owned car. Have a look at what’s available out there, then decide which car would suit best suit your requirements.
Recommended reading on AutoTrader.co.za:
- Which new cars hold their value best?
- Which new cars depreciate fastest?
- Best cars for new drivers
Buying from a dealer vs. buying privately
Should you respond to a private ad in the newspaper or on OLX, or should you head on over to your nearest dealership? While the private seller’s car is perhaps being sold for a better price than the dealership’s, the bank will most likely not finance private sales. If you can secure a personal loan beforehand (preferably not from a loan shark!), there are some good deals to be had from a private seller. But it has its pitfalls too. We recommend reading Martin Pretorius’s article namely Buying Privately: the Pros and Cons.
Get your first car completely paid up before trading in
If you plan on getting your first car financed, try to pay it off so that you can be debt-free before trading it in again. WesBank agrees that a fully paid-up car will prove much more useful come trade-in time, as any money the dealer offers for your old car can be used for the new one. That translates to less money borrowed from the bank, which means you can pay the new car off that much sooner. When the time comes for your next trade-in, you will be in a much better position for something your heart truly desires.
Click here to read about who is eligible for car finance, and click here to read more about getting someone to sign surety for your car-finance agreement.
Steer clear of balloon payments
A balloon payment will require you to pay a large amount of money still owed on the car when your contract comes to an end. Quite often people do not realize they won’t be able to afford this, and have to sell the car to settle the payment. The result? Another vicious circle of debt rears its ugly head.
“Longer finance periods and large balloon payments will bring down monthly payments, but there are definite disadvantages. Buyers end up spending a lot more on the interest over the longer period of the loan, and a balloon payment, also subject to interest, could attract even more charges should a buyer decide to refinance”, says Rudolf Mahoney, head of Brand and Communications at WesBank.
Should you lease a vehicle instead of buying it?
Leasing a vehicle is really just what it says: You pay for the the use of a vehicle for a set period of time and return it at the end of the period - so there’s no nasty balloon payment at the end. It has its pros and it cons, of course, such as limitations on the vehicle’s usage, for example. Yet, it also means that the instalments are more affordable.To read more about this option’s good and bad points, please click here.
Be aware of hidden fees and costs
There’s more to buying a car than you think - from dealerships charging you exorbitant car-buying fees, to your own car’s fuel and everyday running costs, you need to make sure that you have budgeted for everything.
When you’re doing the math, your disposable income is what you will be left with after you have deducted everything that you cannot live without, such as your rent, medical aid, life insurance, groceries, and so forth.Wheels24.com recommends that only two-thirds of your disposable income should make out your car-buying budget, and this should include car insurance, a warranty/ maintenance- or service plan, and also the above-mentioned running costs such as fuel and other consumables. If you really want to be money-savvy, the remaining third should go into a savings account for those unforeseen car-emergencies.