Buying a new car is an exciting experience that needs to be navigated carefully to avoid common mistakes, and the best way to do this is to ask the right questions.
According to Lebogang Gaoaketse, Head of Marketing and Communications at WesBank, excitement can sometimes drown out practical questions.
“Buying with confidence means buying with foresight. Asking the right questions before signing helps keep you financially secure and puts you in the best place to truly appreciate your purchase,” he notes.
To do this, Gaoaketse advises asking four questions: “What happens if my income changes? Am I comfortable with this instalment if my expenses increase? Am I buying peace of mind or financial pressure, and what protection do I have if something goes wrong?”
The first, and sometimes only, question people ask is whether the instalment fits into their monthly budget. While this is an important question, leaving the others out of the equation can be dangerous.
Several factors can influence whether a monthly instalment will continue to fit into your budget for years to come.
According to Gaoaketse, a payment that feels manageable today, could become uncomfortable tomorrow.
As fuel prices shift, school fees are added, grocery bills increase, interest rates also move in cycles, creating further uncertainty.
Monthly instalments could become unattainable once two or three of these pressures converge all at once.
An easy way to determine whether a monthly instalment will fit into your budget when circumstances change is to add R1,000 or R2,000 to your monthly expenses and see if the repayment still fits.
Gaoaketse says that if it does, you are likely in a sustainable position, if not, it may be worth considering a cheaper vehicle, bigger deposit, or longer loan term to bring the figure down.
It is worth noting that a longer term means an increase in the total amount paid on a new car, before even factoring in the balloon payment.
Answering difficult questions
Beyond assessing monthly instalment affordability, South African motorists have several other factors to consider before buying a new car.
South Africa’s uncertain working landscape needs to be factored in when making any long-term financial commitment, as technological shifts bring more disruption.
Commission-bases roles, contract positions, and unsteady small business income all carry variability, while even those with stable income will find it difficult to predict the future at the point of purchase.
Gaoaketse says the question is not whether your income will ever change, because for most it will, the more pressing question is whether your finance agreement has room to absorb the change.
He added that understanding repayment obligations in a reduced-income scenario is part of buying responsibly.
Protection is also worth considering, and buyers often only encounter these options and factors once they reach the point of sale, often without fully inderstanding them.
In the event of death, disability, retrenchment or critical ilness, it is crucial the buyer has credit life insurance in place to settle or reduce the outstanding balance of vehicle finance, protecting the buyer and their family.
Payment relief options also exist, and need to be understood before they are needed.
“Knowing what your finance provider offers in terms of restructuring or deferral and what the qualifying conditions are means you are not reading the fine print for the first time in a moment of financial stress,” says Gaoaketse.
Finally, it is important for buyers to realise that there is a marked difference betwee an affordable and a comfortable car purchase. In this gap is where lifestyle inflation is factored in.
Buyers who opt for a newer model, with an upgraded trim and added features, will have to settle for higher repayments, sometimes beyond what their long-term budget can sustain without sacrifice elsewhere.
“It’s important to remember that the keys are exciting but answering the right questions make them worth having,” concludes Gaoaketse.
Loading ...
