How to buy a car without financing

There are multiple ways to buy a new car in South Africa if you are unable to secure financing.

Below, we go into more detail on three of the main paths of action you can take when attempting to buy a car without the help of a finance agreement.

Cash

The easiest way to buy a vehicle outright without financing is to pay the full amount upfront and in cash.

After deciding on a car you would like to purchase with cash, you must either draw up a sales agreement when doing a private sale or sign an offer to purchase when buying through a dealership.

For these agreements to be lawful, you will need a copy of your ID as well as proof of residence – the latter of which is contained in documents such as a tax certificate, bank statement, or utility bill.

If both parties are happy with the agreement, the money can be paid via a cash deposit or electronic funds transfer (EFT), but it must be noted that companies are legally obliged to report cash transactions of over R25,000 to the authorities.

After purchase, you must register the vehicle in your name within 21 days with documents attained from the seller, whereas the seller will fill in and submit a change of ownership form to remove the vehicle from their name.

The main advantages of lump-sum payments are that you do not pay any monthly instalments or interest rates for owning a new car, but the drawbacks are that it will have no effect on your credit score or your ability to take out financing and loans in the future.

Lease

Another way to get your hands on a new car in South Africa is to lease it initially and then buy it outright at a later date.

Leasing can be thought of as a long-term rental at a less exorbitant cost than what traditional rental-car companies tend to ask.

Generally, a lease agreement’s monthly cost includes the cost of the car, maintenance, insurance, tracking, and annual licencing fees, meaning owners only have to worry about fuel and paying the instalment on time.

Local companies like SA Motor Lease offer “rent to buy” services where one can lease the car on a month-to-month basis and buy it later on without having a good credit score or while being blacklisted.

Loan

Loans and finance agreements are rather closely related, but an important distinction comes from where the application for the financial support is being filed.

A loan is usually ascertained from a bank or third-party lender, whereas financing is arranged by the car dealership or a registered finance provider.

As such, individuals who have excellent credit scores and are able to get the best interest rates might find a loan from a bank more favourable than buying a vehicle through dealer finance, as the monthly rates could be slightly lower.

A loan also gives you the option to put up collateral as security for missing a payment, which could further lower the effective interest rate.