We recently launched our VEHICLE FINANCE product page to help people all over South Africa make a better vehicle finance decision! In the next few weeks, we're going to give you the full low-down on all things vehicle finance, so stay tuned for more after this article.
Do the following 2 things to help us help others:
- Visit our Vehicle Finance page and try out the process! It's completely free
- Share this with a friend or family member who needs vehicle finance
Will you need vehicle insurance when you are financing a car?
South Africa does not have legislation requiring car owners to take out insurance. Therefore, it is not compulsory for people who buy their cars cash. It is, however, compulsory if you are financing your car. The financial institution who finances your vehicle will either insure the car themselves (at your expense) or require proof of insurance.
Even though the monthly premium could be a burden at times and you would want to spend the money elsewhere, there is always a risk that your car could be damaged, stolen or hijacked or damage to a third party. If this happens and you do not have car insurance, you will be liable to cover all the costs from your own pocket. These costs are usually large and can be financially devastating. Therefore, it is a wise choice to choose the right insurance that fits into your monthly budget, but that also covers you for all unforeseen events.
What you need to get vehicle insurance in South Africa
- Basic identity documents.
- Necessary banking documents, such as three-month bank statements
- Take note that when applying for insurance, the insurer will run a credit check
- Details relating to your car, such is as make, model number and year of registration
- Information relating to the factors mentioned above, such as location, security measures and the age of registered drivers
You can apply for vehicle insurance by clicking here.
Make a better vehicle finance decision with these tips
1. Avoid unnecessary debt when building your personal finance
It's very unlikely for any person at a young age to be able to buy their first car cash. Even if it is possible, buying your car cash means you will be depleting a big chunk of your savings which could have gone into an investment opportunity. Many experts will advise to not lose out on unique investment opportunities by trying to avoid debt that is actually "manageable". It is important to get time on your side for the sake of compound interest. BUT, this does not mean going full out with the vehicle cost you need to finance! Instead of getting the latest and sleekest car, rather choose an affordable option which doesn't break your cash flow. Remember, cash flow = opportunities.
2. Keep cash flow available for costs associated with buying a car
Your vehicle finance agreement is only one part of the total sum when buying a car. For most purchasing agreements, there are costs included like admin fees, vehicle insurance, fuel and car services. It's important to keep all of those in mind when you are budgeting for a car purchase. Once again, it helps to make a more modest decision with your vehicle type so that you have enough cash flow for all the other costs (expected and unexpected).
3. Work the system but don't break your budget system
There is a fine line between making use of things like longer repayment periods and balloon payments and getting greedy. But, don't break your long-term budget or net worth by paying chunks of interest and residual capital amounts on your car which could have been avoided. We know many of us need a set of wheels to make a work opportunity possible, but in the end it is only a method of getting from A to B. Your friends will appreciate it much more if you can join them for weekend adventures, trips, fun evenings, and other events than not being able to afford anything due to your long-term vehicle costs. If they don't, maybe you need new friends ;-) Ultimately, work the system so you can afford a vehicle, but don't get greedy because you want flashy for the sake of public opinion.
4. Make a long-term decision
Your vehicle can either only cater to your needs now or it can cater for the long-term as well. Keep your dreams, vision and 5-year plan in mind when buying a car. A sporty hatchback is a dream for a young employee, but it's not going to support a small family.
5. Car payments require integrity
Reality happens to everyone when it comes to personal finance. But, it doesn't mean you have to lose your character in the process. Sure, we all feel the corporate giants are just trying to take us for a ride and make money off us, but the vehicle finance company still made it possible for you to get a car. So, if you're not going to make a payment on time, give them a call and arrange an alternative date. You will be surprised at how accommodating they can be.
6. Keep your credit history in mind
If reality does end up knocking at your cash flow, remember that every missed payment and "no-show attitude" will reflect as a negative notch on your credit history. And it will stay there for a long time. Prioritise your vehicle payments so that your credit history gets a boost instead of a dunk.
7. Don't stress it so much
In the end, do your research and make a fun decision! We all need to go through a learning curve and there is no use in stressing over it like your world will end if you make the wrong decision. In the long run, a wrong decision will only add to the wisdom you offer others.
Next week, we'll talk about the alternatives to vehicle finance and ownership, and the most expensive tank of fuel you ever buy if you do it with your vehicle finance application! Get started with vehicle finance by clicking here.
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