Car Finance

Most consumers select one of the following options: a cash deal; instalment; instalment with balloon (residual) payment, or lease. However, these days you could also consider a guaranteed buy-back deal, and we also provide important information regarding so-called instalment take-overs.

But before you get to decide how you're going to pay for your wheels, if it’s a used car, you need to know that the price is right, and the same applies to what you’re offered as a trade-in on your existing car.

STEP 1 - Know the value of the car

The industry relies largely on the Transunion Auto Dealers Guide to determine the current value of specific vehicles, and you're very much on the back foot if you don't have access to that information.

Luckily there’s a way to get it: R10 will buy you a Transunion Car Value report on a specific vehicle make and model year, which will indicate whether or not your trade-in offer is fair, and whether or not the car you want to buy has been overpriced.

STEP 2 - Verify the car

With respect to the car you’re keen on, it’s well worth spending R99 on a Vehicle Verification Report which reveals the car’s model year (often misrepresented), accident history and more.

STEP 3 - Interrogate the Offer to Purchase document

Once the purchase and/or trade-in price has been agreed, don’t sit back and leave it to the F&I (finance and insurance) manager in a dealership to “sort out” the paperwork for you.

It pays to interrogate every line of the Offer to Purchase document.

If you traded in a car, check that the trade-in amount you agreed on has been accurately reflected.

The F&I person will do their best to up-sell you a host of add-ons to pad the deal; products such as paint protection, fabric protection, rust-proofing, dent-and-scratch policy, maintenance plan. If you do really want one or more of those, you’ll probably be able to get a better deal on them yourself.

Look for the big add-on, the “delivery/dealership/on the road” fee which is several thousand Rand. Paying extra for number plates, a tank of fuel and for licensing and registration - plus having the dealership deal with the schlep of getting it done - is perfectly justifiable, but anything over that is not; it’s just the industry’s way of bumping up the purchase price of the vehicle. So refuse to pay it, or at least negotiate a substantial reduction.

The Payment Options

Cash

If you don’t have the full purchase price in cash, but you do have “fat” in your home loan, you’ll pay a lot less in interest if you fund the balance out of your home loan.

Upside: The car will cost you less, thanks to you being spared paying a whack of interest.

Downside: “What discount do I get for cash?” doesn’t work with motor dealerships. They make more money out of you if the deal is financed.

Tip: Don’t tell the salesman you intend to pay cash because the dealership might not be as moveable on purchase price if they know upfront that they aren’t going to make any money off you from financing.

Instalment

This is the most common car payment method. You pay off the car in monthly instalments for up to six years (72 months) either with or without a deposit. The longer the term, the more interest you pay. Ideally you should put down a sizeable deposit and structure the loan over the shortest possible time - that way you pay the least interest.