by The recent rude awakening that the South African economy is hopping along at rickshaw pace rather than bullet train speed meant some changes to the household budget. More specifically, selling our new car and buying a second-hand family car.
Tightly clutching my bar-coded ID book as if it were a ticket to the next roller coaster ride, I walked with trepidation into the local used car dealer that runs in conjunction with an approved new car dealership.
Popular culture has taught us that used car sales staff fall somewhere below lawyers, fraudsters and cheats in the honesty stakes, but I was pleasantly surprised. No PEP-stores inspired flashy signage, no banana-yellow wearing assistants, and most encouragingly, no aggressive selling tactics. The salesman assigned to me was courteous, helpful, informative and not at all pushy. I was encouraged to take my time, browse through the vehicles on offer, and test drive my chosen few.
Online car sales versus dealerships
Deciding to do some more research before making a commitment, I thanked the salesman and headed to the nearby coffee shop for their free Wi-Fi and heavy dose of caffeine and sugar.
Gumtree, naturally, was my first stop, and there I found a mixed bag. Accident damaged vehicles, classic cars, sports cars, expensive cars, student cars, cheap cars, even rickshaws! You name it, Gumtree has it, which makes it so important to set your filters carefully, and find the quality vehicles through all of the noise.
Once I had narrowed down my selection, I was left with quite a wide geographic cross-section to cover. My next port of call was to phone up the various car owners/dealerships to find out a little more about the secondhand car’s histories: where were they serviced, how many previous drivers did the vehicles have, were the owners able to bring me the car to test drive, etc.
My very next stop was another second-hand dealer, but this time it was a small-time dealer in a country-town. Rather disappointingly, this dealership looked more like my preconceived idea of one: stained carpets, scruffy salesmen, bad coffee, and cars that reeked of cigarette smoke inside. I test drove a second-hand Mercedes that had seen better days, then made a hasty exit.
At the end of the day, the best place to look for second-hand cars remains everywhere, starting with the internet to narrow down the search and find reputable dealerships, and then ending in a test drive and thorough vehicle check.
A second-hand car purchase can result in quite an expensive debt, so it is not a decision that should be rushed into without due preparation. And while dealerships may offer more quality checks and balances, their overheads can also edge up the price of the vehicle where buying straight from an owner may be more of a gamble but offer a better price.
If you opt for the latter, ensure you take along a friend for security reasons, and never test drive a vehicle on your own.
Financing your secondhand vehicle
Unfortunately, many vehicles older than between five and eight years have to be financed either in part or full by personal loans which can be expensive.
Ensure you compare providers and push for the best interest rates possible if you need to go this route, and then put the interest costs into your budget planner to ensure affordability before you commit.
It is also helpful to complete an affordability assessment before applying for a loan. This will let you see how much you can really afford so that you make the correct decision on the dealership floor. WesBank suggests the following steps:
• Step 1: Fill out the minimum expense table. Account for your nett income and total expenses. Your nett income is your take home pay after tax and deductions. Total expenses includes all of your household expenses: food, medical aid, bond or rent, water and lights, gym subscription, cell phone and general costs.
• Step 2: You will need to submit your identity document or ID card, driving licence, recent utility bill to serve as proof of residence, three month’s banks statements and a recent payslip, or your three most recent payslips dating back three months.
• Step 3: The bank will verify the information on the supplied documents to ensure that the applicant is indeed the person who they claim to be. This is one of many steps to avoid fraud. The bank will also review your expense table to work out how much positive cash flow you have after all your expenses are paid to check that you can afford the car loan you are applying for.
• Step 4: The bank will also do some other credit checks. The credit provider will review how much credit you are still paying off. At the same time, they will evaluate your repayment history to double-check that you are managing to pay your debt on time.
• Step 5: After all these checks are complete, the bank will calculate whether or not you can afford the car along with comprehensive insurance, fuel and maintenance of the vehicle.
• Step 6: The bank will at this point tell you if you are successful or whether your car loan has been declined.
• Step 7: The Finance and Insurance (F&I) expert at your dealership will assist with your needs analysis and recommend an appropriate deal structure for your budget. Should your application be declined, they can also offer advice on the measures that you can follow the next time you apply.
It is important to remember that the affordability assessment was designed by the National Credit Act to give banks a standard to analyse whether car buyers can indeed afford the loan for which they are applying. The rules are there to ensure you don’t become another credit impaired consumer according to Wesbank.
“When you decide to apply for a car loan, your bank goes on the car-buying journey with you and it needs to know everything about your credit history from your budget to your gym contract,” says Rudolf Mahoney, Head of Brand and Communications at WesBank.
“When filling in your affordability assessment and car finance application, you show the bank how much you earn and what your expenses are. The affordability assessment is a process that helps you determine what you can afford on your current budget, thus preventing you from getting into debt that could be detrimental to your future.”
To help consumers calculate their monthly budgets and perform a manual affordability assessment, WesBank has an affordability calculator. Once car buyers have worked out their discretionary income they can also use the WesBank loan repayment calculator to budget for the running costs and monthly car instalments.
Lastly, do not forget to get competitively priced and comprehensive car insurance. Compare now.
