Purchasing a brand new car is really exciting – and once you have made the decision you probably want to get your car NOW! Be careful not to let your excitement interfere with your financing option decisions.
Here are some tips from Imperial Auto to ensure that find you the best finance deal possible:
Speak to the finance and insurance (F&I) manager at your nearest dealership. This will allow you to interact with a specialist and clarify any questions you may have. They can also assess your specific situation and offer you advice on structuring your finance agreement.
Ensure that you structure your deal the best way for you. Here are some options:
Deposit – paying a deposit reduces your monthly repayment. If this is possible, it would be a smart move to make from the get-go!
Fixed VS linked interest rate – during periods when interest rates fluctuate, you may want to consider discussing a fixed rate with your bank. This option has pros and cons to consider.
The contract period – remember that a longer period reduces the monthly installments but attracts more interest payable over the period. This is entirely based on what you can afford on a monthly basis.
Balloon payment – opting for a balloon payment means that you will need to settle a lump sum in order to own the vehicle at the end of the contract period. Although a balloon payment will reduce your monthly repayments, it increases the financial burden at the end of the contract period. You need to be consciously aware of the future implications of this type of deal structure.
There are a range of insurance products available which cover both the car (warranties, service and maintenance plans) as well as yourself (death, disability and retrenchment cover) which you can consider. Whichever you choose would depend on your personal situation as well as the car that you intend buying.
The F&I will submit a single application to all the banks and obtain quotes from the various banks on your behalf, thereby making the process transparent for you to choose the best interest rate.
There’s no guarantee that you will be approved for vehicle finance, but there are things you can ensure you do which will help improve credit health and greatly increase the chances of being granted credit.
1. Work out your affordability
Find out how much you can afford to spend on a car. To do this, simply take your income (after taxes and deductions) and subtract all living expenses. These costs must be deducted from your total income to find out your disposable income.
2. Don’t forget the running costs
Affording a car isn’t just about the monthly installment. Fuel, maintenance and insurance are additional monthly expenses that need to be budgeted for.
According to an article on Business Insider, the latest motor trade sales from Statistics South Africa show that South Africans are spending more on fuel than on buying new vehicles. 
3. Save up for a deposit
Financial responsibility reflects well on your credit profile and will assist in ensuring that your finance application will be approved. If you’ve shown the bank that you can budget responsibly, you’ll really impress them with a deposit. Paying a deposit reduces the amount of credit required for the transaction which, means lower monthly repayments and improved affordability.
4. Get rid of unnecessary debt
The National Credit Act requires the bank to take all credit facilities into account, so your credit card and overdraft debt is assessed. These figures are used in assessing your affordability.
Clarens, Free State Province