Unquestionably, purchasing your first vehicle is a daunting and exciting milestone that you only get to experience once. And it may be one of your financial goals and objectives for 2023. However, purchasing your first vehicle has more to it than just selecting the make and the model. It has a large financial responsibility attached to it which you will need to fund, and more importantly, afford. 

For many South Africans, buying a vehicle in cash is not an option which means financing is the go to route. In addition, alongside looking after the the vehicle, there is a large financial responsibility that you will need to honour each month.

During this (Q2 2022) period, 81,533 used and 38,824 new vehicles were financed by TransUnion, with only 27% of the pre-owned models being under the age of two years old. 

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Establish What You Can Afford

It’s easy to get caught up in all the great vehicle finance deals. However, you will first need to establish what you are able to afford without compromising your lifestyle. Furthermore, be aware of the additional costs that may be associated with vehicle finance. This may influence your affordability. To calculate your affordability before purchasing a vehicle, an easy calculation can be used: Income – Expenses – Other Debts = Your Affordability

Income –

• Your total income minus deductions
• Other income 

Expenses – 

• Rent
• Home or health insurance
• Groceries
• Water & electricity
• School fees
• Transport fees & fuel

Other Debts – 

• Credit cards
• Personal loans
• Clothing accounts
• Store cards

Shop Around For Better Finance Deals

When choosing a dream car, It is important that you shop around for the best finance deals before settling. The vehicle finance monthly repayment should always be within your budget and should always have the lowest interest rate possible. With each rand you save on the finance deal, you can dedicate that to your savings or save it for the on-going costs of the ownership of the vehicle.

Don’t Miss Any Vehicle Repayments

Missing a repayment on your vehicle could have a number of consequences. If you go into arrears, it will cost you more in interest and fees. Consequently, you will need to catch up on these payments quickly in order to cover the interest and fees accrued in the missed period. However, if you miss a number of payments, this could result in your credit provider repossessing your vehicle. In the case the vehicle is repossessed, the consumer is still liable for the monthly repayments, fees and interest for that vehicle on the remaining balance.

If You Are Denied, What Can You Do?

In the event that you are denied from applying for vehicle finance, this is most likely due to your credit score. Credit providers and large banks will look at your credit score and payment history. Furthermore, increasing the best chances of being granted vehicle finance, a high affordability and a high, low-risk credit score should suffice for the vehicle finance houses.

The banks use your credit profile to determine whether they will finance the vehicle and at which interest rate. Banks use credit scores to determine risk, and the higher the risk the less likely they are to grant you the finance deal. 

For more information, contact us.