Many of us can’t afford to spend cash on a car, no matter how much we save. Although there are many opinions on the best way to purchase a car in South Africa, financing is common.
A car purchase is often a major financial commitment. It is important to discuss this decision with a financial professional. It is important to take the time to make sure you have the funds available for the car, the insurance, fuel, and tires. This can cause major problems down the line, so take the time to plan properly!
Things You Should Know
Car financing can be confusing. It can be confusing to understand the fine print and complicated terms involved in car finance. We are happy to give you some insight on key terms in car financing.
Finance Term
The term of the loan is called the finance term. This is the length of time you plan to pay off the vehicle. The shorter the term, the lower your monthly repayments will be and the higher the interest rate you will pay. The usual car finance contract will last for 60 to 72 months. Because this is a long-term commitment, you should carefully consider your options.
Balloon/Residual
A residual or balloon payment is a delay in the payment of your vehicle. It will be converted into one lump sum at the end. However, this can reduce your monthly payment. The final remaining amount will be due after the 60- or 72-month period. You must ensure you have the funds to pay this repayment. Calculate the remaining amount and decide if you can afford to pay it all at once.
Instalment
The monthly car instalment represents the amount you will be paying each month. This amount is usually paid in the form a debit order. The interest rate and fees can cause this amount to fluctuate slightly. You should also check whether the monthly service fee is included in the instalment.
Cars are a valuable asset that can be used to travel, commute and make memories. It is important to take your time and make the right decision. You should take your time to make the right decision. Talk to a financial advisor if you have difficulty making the right decision.
