You've worked hard, you've saved up, and you're ready to pull the trigger on buying a new car. It's maybe your first time buying, maybe you're a bit rusty, or you're helping out a friend or a family member. Have no fear: this structural checklist will be your cheat sheet to make car buying a breeze if you're unsure how to handle a vehicle finance contract.
Related: Is it cheaper to buy a car cash or on finance in SA?
Check your budget
Before you go about signing anything, you'll need to first establish if the vehicle you're after is within your budget. Once you've established what you need:
- A deposit will help reduce your monthly repayments, and most people put down 10% of the vehicle's purchase price.
- Check your credit score. Your credit score is an indicator for banks and finance houses on whether you're likely to be able to pay off a vehicle. More on that here.
- What kind of Finance can you manage? Balloon or Residual?
Briefly, a balloon payment can be a cat amongst pigeons in the sense that while your monthly repayments are lower, the outstanding balance at the end of a finance term can come as a shock. You have two options then: settle the outstanding amount or refinance the balloon amount, which can extend your repayment period. It's best to avoid Balloon repayments unless you actually handle them.
Cut your coat to fit your cloth, as the old saying goes.
Seen a car you like on AutoTrader? How about giving our finance calculator a swing to get an estimate on monthly repayments?
Those are the two most important factors to consider. However, here are some others you need to consider that are often overlooked.
- Insurance. Life happens, and when it does, it's best to guard yourself with insurance, be it Third Party or Comprehensive.
- Maintenance and Service plans. Most brand-new cars come with a service or maintenance plan, or sometimes it's optional. If that's the case, it's best to budget for it. Plus, vehicle maintenance on components like tyres and brakes tends to get overlooked.
- Fuel costs. Get the vehicle that best suits your average commute. Perhaps you need something that prioritises efficiency over overall performance.
Documents for Finance
Some finance houses or banks will need particular documents, but these are the general ones required:
- Copy of your SA ID Document (In most cases)
- Proof of Income (Payslip)
- 3 months bank statement if you're employed, 6 months if you're self-employed
- Proof of Residence (Municipal Rates bill, for example)
- Valid Driver's License (You can't be approved for Finance if you don't have one)
- At the time of writing, you need to earn a minimum of R7500 per month.
Now you're ready to apply for Finance.
Once you've got the above setup, you've searched AutoTrader to see what best fits your budget (Did you know our search filters include a Finance filter? Try it out), you're now ready to contact the dealership and apply for Finance through them. Your average dealership will have a Finance & Insurance consultant, and they'll handle the necessary applications on your behalf once you've furnished the documents they need. You can also apply for vehicle finance yourself in advance and get Pre-Approval.
How can you improve your chances of getting Finance?
You can better your chances of getting Finance and getting favourable rates by the following:
- Credit Score. As mentioned earlier, your Credit Score is a strong indicator to banks and finance houses of your ability to reliably pay off a vehicle. The higher the score, the more favourable your chances are.
- Employment. Solid employment, as well as how long you've been employed, improves your likelihood because it indicates stability.
- Deposit Size. If you can put down more cash, that's a surefire way to improve your chances of Finance. It means less money for the bank to lend to you, and it lowers your monthly repayments.
