For most of us, a car is one of the biggest purchases we’ll ever make after a house so it’s naturally something you want to get right. It can be easy to get overwhelmed by the thousands of models on offer and various pieces of advice from expert salespeople. That’s why we’ve put together the five important steps to take to ensure that you make a smart buy that is both great on the road easy on your pocket.
Step 1: What’s the right model for your needs?
When defining your needs, think with your head not your heart. Make a list of what you really need, not want. For example, if you commute great distances, you have to prioritise fuel efficiency over speed or good looks. If have a very busy, taxing job, you will regret a car that needs a lot of maintenance. If you have a growing family, that boot space is going to become all important. Research various different models and compare the cost of services and parts. Something as simple as an oil filter for an exotic model of car can cost three times more than that of mainstream model of car.
Furthermore, be strict with your budget and remember to think beyond your monthly repayment amount - be sure to budget for running costs too. A well-known tip to calculate those extra costs: if your car payment is R6 000/m, budget for another R6 000/m for fuel, maintenance and car insurance. Always aim for the newest car with the lowest mileage possible for your budget.
Step 2: Know your prices and negotiate the best deal
It’s important to take your time to research sales prices before setting your heart on a specific car. Visit a few second-hand car dealerships and request written estimates to use as bargaining tools later. You could also visit websites such as carfind.co.za.
Once you are confident that you know how much you should be paying, start shopping around. Some say that dealerships are more likely to shift stock towards the end of the month or calendar year, or whenever their financial year-end is. That’s because salespeople are eager to discount at these times in order to hit their targets or to clear old stock to make way for new models. Never be afraid to negotiate - or walk away! Get more negotiation tips in this article.
Step 3: Be smart about financing your car
The first prize when buying a car is always to do so in cash but very few people can afford that luxury. That’s why it’s important to look for a loan with the shortest term and the lowest interest rate possible. Even if the monthly repayment seems higher, you will save on interest in the long run.
Try to put down as big down payment as possible - ideally 10 to 20% of the total purchase price – and pay for any upgrades or additional warranties in cash rather than financing those too.
Step 4: Get the most cash for your old car
If you’ve kept your existing car in a good condition - keeping up with its maintenance and services - it shouldn’t be too hard to sell it at a good price. Make sure you know how much it’s worth by doing your research online or discussing a trade-in with a reputable dealer. If you do decide to go the trade-in route, always ‘bank’ your deal - in other words, finalise the price of your old car before discussing the new purchase you wish to make.
Step 5: Pay the right insurance premium
Don’t assume that your insurance premium for your new car will cost the same as what it did for your previous car. Know what the retail and market values are of the car you are intending to buy. Check its replacement value to make sure you are not underinsured.
There are four types of insurance to consider:
Comprehensive: This includes third party liability and covers accidental loss or damage to a vehicle. Comprehensive car insurance now comes with a guarantee. Guaranteed value insurance: cover that makes things right if your car is written off or stolen (Ts and Cs apply).
Limited cover (fire and theft): A more cost effective option, this will cover accidental loss or damage to a vehicle, including third party liability – but only if the loss or damage is as a result of fire, lightning, explosion, theft or attempted theft.
Third party only: The bare minimum cover you should have, this covers the amount for which you are legally liable to a third party (if the liability relates to the vehicle).
Shortfall cover: Sold as an additional add-on cover, shortfall cover pays the difference between your vehicle’s sum insured or market value (whichever is the lesser) and the outstanding settlement value in terms of a credit agreement that you entered into.
Should your car be stolen or written off after an accident and you are not able to settle the outstanding debt with the claims settlement amount, shortfall cover will pay the difference subject to the terms and conditions as stated in your policy summary. In the case of Santam, for a slightly higher premium, your residual (balloon) payment will also be covered.
If you have any questions about insuring your new vehicle, speak to your broker or call us on 0860 444 444. If you’d like to make amendments to your existing insurance policy with us, you can download the Santam app or visit our client site. Get more vehicle advice on our blog, with many more articles on smartly buying a new or used car.