- Buying a car is a big deal – read this advice
- Three major deal options – which will suit?
- And what about your future wheels needs…
CAPE TOWN, Western Cape – Finance house WesBank has supplied The Corner with a comprehensive guide to the world of vehicle finance – our editor hopes it will answer you questions and ease you worries… here’s what the bank has to say:
Buyers are often confused by the range of loan repayment options. Often – given that once the car has been chosen, enthusiasm to close the deal takes over, the don’t ask questions.
”Buyers tend to just want to get the car’s keys and get on the road,” WesBank said.”Consumer budgets are stretched so it’s important to understand all vehicle finance options.”
DRIVE NEW EVERY FEW YEARS
Guaranteed future value (also known as GFV) is becoming popular. ”This product,” WesBank said, ”appeals to a changing customer, one seeking to avoid risk at the end of the term (loan period) and wants ‘usership’ of the vehicle instead of full ownership.
”The concept allows the customer to drive a new vehicle every three or four years.”
Ghana Msibi, WesBank’S executive for motor business, added: ”Flexible finance options are important but clients need to understand which agreements are available so they can make a finance decision that suits their financial situation.”
KEEP YOUR CAR IN GOOD NICK – OR YOU WILL PAY
For instance, understant that a car’s value starts to depreciate (loses monetary value) as it leaves the showroom. A GFV will calculate the future value of a car provided the vehicle condition, mileage and maintenance agreements are adhered to.
This guaranteed future value, WesBank says, tells the customer what the car will be worth once (in rand terms) the contract term (usually three or four years) ends.
”The customer will be given three choices,” WesBank said. ”Sign for another GFV to drive away in another new vehicle after settling the outstanding finance on the first and own the same vehicle, or return it to the dealer.” (That, of course, is if the car is undamaged and has not reached its allotted kilometres.)
LONGER THE TERM, LOWER THE PAYMENTS
But what about other finance options?
Well, there’s instalment finance… the most common and straightforward finance option and involving monthly repayments calculated on the purchase price of a vehicle (minus whatever cash deposit / trade-in figure is made) and can involve payments over 12 to 72 months.
The longer the term, the lower the monthly repayment, but the total amount of interest paid on the load will become higher as the term lengthens. (The Corner suggests asking for the total cost of each when the term ends.)
Instalment finance with a balloon payment… is similar to instalment finance, except a portion of the purchase price is set aside so repayments can be calculated on a lesser amount.
Simply put, a balloon payment is similar to a deposit except it’s payable at the end of a term instead of at the beginning. While there’s the temptation here of lower monthly repayments, the eventual repayment might so large it will require another finance period.
WesBank has a purchase-price calculator to help to determine the size of loan your budget can handle. Obviously it’s only intended for estimates.
ASK THE EXPERT…
There’s also a calculator to help work out monthly repayments based on finance-term length, deposit, balloon amount (if you choose that finance option) and interest rate.
However, each WesBank-associated auto retailer has a finance and insurance expert to help with the processing and calculations.
And, The Corner warns, don’t forget to add the monthly vehicle insurance cost to the calculation…!