Buying a car? How to finance it the smart way
When it comes time to buy a new car, financing it can be an issue if you are not familiar with vehicle finance.
But there are smart ways to ensure that you are able to finance your dream car which will ensure that you receive the best deal for your money.
You will need to look into different options and be sure to compare multiple quotes so that you can choose one which is best suited to your needs.
One of the very first steps for dealer car finance to take is to draw up your budget, as this will allow you to look only at cars that you can afford. For example, if you find that your disposable income is only R2000 a month, you will need to look at a car that is this price or lower in order to afford it. Then you can move on to looking at your credit report and correcting any discrepancies. Want to buy your new car the smart way? Keep reading for some top tips.
Start with the basics
Starting with the basics, which means drawing up a budget, is the very first step to take when buying a car. This way, when you apply for vehicle finance you will be able to provide your lender with a somewhat exact number, which can help you to negotiate better interest rates, terms and conditions.
Your budget can be calculated by looking at your salary (once taxes have been deducted) and subtracting all of your monthly costs from this amount. This will give you your disposable income, which will be used for repaying the car. Your budget should also include insurance repayments, maintenance fees and service fees. These costs must be included so that you do not find yourself coming up short each month on your repayments.
Understand your credit rating
Understanding and knowing your credit rating before you buy a new car is also highly important. You can check this for free online which will allow you to see whether the score is good or bad. In South Africa, a favourable credit score is from 680 to 799 points, and this is what the banks will look at on your application.
A lower credit score might mean that you will be paying a higher interest rate, but if you assure the bank that you are working towards solving your credit score and repaying your debts, you might be able to negotiate your rates. Sadly, if you have little to no credit history, it is not likely that you will be approved for a loan. But you can ask about special packages that are geared towards people such as graduates, who usually do not have any credit history due to studying.
What car do you want?
Now, this is arguably the most important step of the process, as it can have an impact on both your budget and your repayments. It is best to think intelligently about the type of car you want, especially when it comes to how it will be used. Your vehicle should be safe and reliable, and you should try not to be swayed by flashy extras that cost more money.
If this is your first car, you might want a luxury sedan or a 4WD, but unfortunately, your budget probably does not allow for this. You will need to scale down your expectations and look for a car that is within your budget but that ticks all of your boxes. For example, if you need a car to get to and from work but also enjoy going to markets on the weekend, a car like a Ford Figo is a good model to choose. If you are simply going to be driving within your city limits, then something smaller, like a Kia Picanto is ideal.
What type of financing is best?
Choosing the right type of financing is another important step in financing your car. You can choose from a variety of different offerings, such as a vehicle loan, personal finance, graduate finance, or even finance directly from the dealership. You can ask for quotes from different providers in order to make the best decision for your finances.
It is important to do research on these different types of finance, especially if you are being offered options such as balloon payments and a fixed-rate interest package. A balloon payment can lower your monthly repayments but you will need to repay this amount once your loan period is over. Graduate finance is ideal for those who have been studying and have not been able to build up any credit.
Think smart for your future
Buying a car intelligently is the way to go for first-time car buyers and those who might be looking at buying their second car. Start with the basics by drawing up a budget that is as accurate as possible so that you can negotiate with your lender.
Understanding your credit rating is important, and you can perform your own credit check online. You should also look at the types of cars you like as well as what finance will work best for you. Soon you will be sitting behind the wheel of your dream car.