Buying a car

You have decided it is time to get yourself from a to b, or that your car simply doesn’t do it for you anymore.
Buying a new car comes with certain financial implications and often people are more impressed by the features of the car than the impact of their financial situation.

  • Do you need a deposit for your car?
  • How long will you finance your car for?
  • What will your interest rate be?
  • What will insurance cost on your car?

If you have an existing car finance agreement, find out what your settlement is and what the trade in value of your car is. There might be a shortfall between these amounts and you will either need to refinance this amount or settle it with your savings.

You have decided it is time to get yourself from a to b, or that your car simply doesn’t do it for you anymore.

Buying a new car comes with certain financial implications and often people are more impressed by the features of the car than the impact of their financial situation.

A residual payment or balloon payment is a portion of the vehicles cost price that you need to repay at the end of the finance term. It is often around 35% of the capital. Car dealers offer residuals so that the monthly repayment on new cars are lower. At the end of the finance term, when this amount is due, you can either settle this amount in cash or some institutions will offer you a repayment plan. The interest of this amount forms part of your monthly repayments, and should you wish to refinance your agreement, you will pay double interest on this amount.

If you have financed your car, part of the agreement is usually that you have comprehensive car insurance. Here are a few questions you should ask your insurance company and why it is important.

Depending on your type of claim, your excess might be different. The excess or first amount payable will be the portion you need to pay to repair or replace your car. The higher the first amount payable, the lower your monthly premium will be. It is advisable that you have the excess amount as part of your emergency fund so that you are not left destitute when something does happen.

You’ve had an accident and that car that you drove into just so happened to be a Lamborghini or a Ferrari. If the accident is found to be your fault, you will become liable for the damage. Your insurance company will cover the cost of repair, but this is paid from a 3rd party limit. You need to know what your limit is as certain products have a very low limit in order to reduce your monthly premium.

If your car is in for repairs after that accident, or your car was stolen, you still need a car to get to and from work etc. If you have included car hire on your insurance, you will be provided a car to go about your daily business so that you are not inconvenienced too much. Ensure that your car brings you a stress free ride; understand your finance, maintenance warranties and insurance options before you buy.

Insurance companies will often give you a discount if you combine your car and household insurance.