#money-tips | 3 min read

What to consider before buying a car

By TymeBank - 20 July, 2021

Whether you see it as a status symbol or just a mode of transport that takes you from point A to point B, there’s so much to consider when What to consider before buying a car.

Buying your first set of wheels is such an exciting time and adulting milestone, but if you’re not careful, it could put you in a deep, dark hole of debt. Here’s everything you need to consider before buying a car.

What is your reason for wanting to buy a car?

Could it be pressure from friends or family, or do you genuinely need the car? That is the question. Knowing why you’re buying the car will make your financial life much easier because that will determine the type of car you’re buying. If it’s peer pressure that’s making you run to the car dealership for a spanking new luxury German machine or sports car, then you're risking living outside of your means just to keep up with the Khumalos. 

Hey, we’re not saying aspiration is a bad thing, but remember to take baby steps while building your life. It’s important to know that your car will be an asset and a liability to you. It’s an asset because having a car certainly comes with comfort and convenience, but it’s also a liability because it adds extra costs.

Extra costs! What extra costs?

Yep, about those... petrol, services, insurance, tyres… and if you like to keep things spick and span, then car washes too! All that maintenance needs money. But, you’re a skhokho, you’ve thought about this already, right? Just remember, in our current economy, petrol prices go up not every year, but almost every quarter. So, it’s best to factor that into your budget and weekly/monthly costs once you buy a car.

Stay within your budget

Before you get carried away with all the trimmings and extras that come with your prospective car, remember that it is the salesperson’s job to upsell you and they’ll try to convince you that it’s only a “few hundred extra” per month. It all adds up, especially when you’re paying it off over a long term, with interest. Know what you can afford and what you can realistically drive out with from the car dealership.

Choosing the right car dealership

This will mostly likely be influenced by your choice of car — whether you want a brand-new or pre-owned car. There are many dealerships out there, especially for pre-owned cars, with varying costs, catches and standards. Don’t be caught out and pressured into a deal you’re not comfortable with. Shop around for the dealership you trust and negotiate the price you pay.

Save up for your deposit

This will be your saving grace, because saving up for a deposit means you pay less interest. The greater your deposit amount, the lower your instalment and the less interest you incur. 

TymeBank has just the thing to help with that! GoalSave makes it easy to put money aside and let it grow until you’ve reached your goal amount. When you apply for a car loan, banks will look at your risk profile (credit score) and whether you’ve saved up for a deposit or not, before approving your application.

What’s a credit score?

Put simply, these are the points you have to qualify for any loan or credit at a store. Your phone contract, your clothing accounts and other small loans you may have influence your credit score. In essence, the more debts you have, no matter how small, the lower your credit score. Before you buy a car, you want to have a healthy credit rating, because your credit score will definitely influence your interest rate.

Interest rate you say?

Because a car is an expensive purchase, and one that depreciates, you need to mind the timeline of your loan if you are financing it. Try not to be too fixated on the instalment you will pay each month. Look at the interest rate you’re offered, find out what the add-ons are in the contract, and decide if you need those add-ons. You can use the calculators on websites such as AutoTrader and Cars.co.za to work out your instalments based on the interest rate you’re offered. 

Beware of balloon payments

This can be summed up in one word: Beware! Balloon payments are structured to entice unsuspecting buyers into buying cars they can’t afford. The moment you hear a salesperson suggesting that you ‘structure’ your car deal and the conversation turns to balloon payments, it means you actually can’t afford the car. 

A balloon payment lowers your monthly instalment, so you pay a large chunk of the debt at a later date. At the end of the repayment period, you are expected to come up with the lump sum. And if you can’t, you’re forced to refinance the car into a new car loan.

Be smart with your money

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