The first thing you’ll have to decide on is whether you choose a fixed or linked interest rate and it’s vital to understand the difference between the two.
A fixed rate means that you will pay the same installment for the duration of your loan contract irrespective of whether the interest rate increases or decreases. Choosing a fixed rate may mean you initially pay a bit more on your loan, but you are protected against interest rate fluctuations. If you choose the linked interest rate option, your installments will be determined by the SA Reserve Bank’s Monetary Policy Committee’s repo rate changes.
You should also consider the contract period length. You can choose anything between 12 and 72 months, but bear in mind that the longer your contract, the more interest you wind up paying in the long run.
Know all the conditions of the balloon payment deal you’re offered and make triple sure you know how much you’ll owe at the end of your finance term.
Understand what the contract says about extras
“The contract signing is when you’ll be given a breakdown of what you are paying for. This will include the vehicle’s invoice price as well as any delivery, licensing and admin fees. You will also be given the option to include any value-added extras,” WesBank advises.
At this stage you can add products to protect your finance like gap cover insurance that will cover the difference of the car loan owed to the bank in the event that your comprehensive insurance doesn’t settle.
You may also want to consider taking up an extended warranty and service plan.
“You will be given the option to include these products in your finance package, allowing you to spread out the payments over the term of your contract or you can opt to pay them in cash.”
You won’t be able to drive your car off the dealership lot without comprehensive proof of insurance if you decide to organise insurance privately and not through the dealership.
Take your time to compare the insurance quotes you receive directly from the dealership and those you source through comparative websites. You may very well get a better deal on your own.
Insist on a warranty
If you’re not buying a new car and depending on how old the vehicle you’re purchasing pre-owned is, your car deal might not automatically come with a warranty, but according to FNB, most reputable and “authorised” dealers will generally give you some kind of warranty offering.
“Because their reputations and their relationships with the banks that finance the vehicles they sell are important to them, they generally keep their end of the bargain when it comes to latent defects on a vehicle,” the bank says.
“They also provide you with additional services, such as vehicle licensing, a vehicle condition report, roadworthy certificate, vehicle finance and insurance.”