Ina Opperman

By Ina Opperman

Business Journalist

Buying your first car? Here is some practical advice

You must decide if you want to buy a new or used car, where to buy from and how you want to pay for it. And never forget: the total cost of owning a car.

Buying your first car can be exciting, but also daunting because it is the first time in your life that you will commit to spending such a large amount of money.

Young professionals who recently graduated and need a car to get to work can find the process of selecting, financing and buying a car overwhelming. WesBank offers the following advice to first-time car buyers to help them better understand the ins and outs of making a long-term purchase agreement and provide the tools and resources they need to make informed financial decisions.

“We strive to help young people achieve the freedom and advantages that come with owning a car, while ensuring that it does not become a financial strain,” says Kutlwano Mogatusi, communications specialist at WesBank.

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How to choose: used or new?

When considering what to buy, new and used cars have advantages. A new car, for example, comes with no previous history. This means you will be in full control of how well it is driven and maintained and you will also have options such as maintenance plans and warranties from the manufacturer, which is a definite plus for managing costs and risk, Mogatusi says.

“Used cars, on the other hand, already have a history that will help you to make an informed choice if the previous owner kept a detailed service history, but make sure you ask the seller about any issues with the car or if it has been involved in an accident. You should be able to tell from the state of the car if it was well looked after, both inside the vehicle and under the bonnet.”

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Choosing a reputable dealership

Buying your car from a reputable dealer will ensure peace of mind. “The dealership environment is professional and safe and qualified people will guide and help you through the process, including all the admin and paperwork, which can be daunting for a first-time buyer.”

The dealer is responsible for ensuring the cars on the floor are in good condition, not stolen and have no outstanding debt attached to them. Reputable dealerships have inspection reports for their cars that you can ask to see. Mogatusi says you can also ask the dealer if it offers any guarantees and make sure you get all the facts around this in writing.

Understanding financial terminology can be quite challenging, especially if you just start out on the car buying journey. Therefore, when you encounter jargon that you do not understand, ask questions and request explanations that simplify the terms.

“To get started, it is important to grasp some of the basic terms that are frequently used in the world of vehicle finance. By understanding some fundamental concepts, you will be better equipped to navigate the financial discussion and the meanings behind the jargon.”

These are some of the basic terms you should get to grips with:

Credit score

Your credit score reflects how you manage your monthly payments for clothing accounts or a student loan as your payment history is shared with the credit bureaus.

Financial institutions use this information to determine whether you will be a responsible candidate to lend money to or a credit risk.

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Finance period

The finance period is the length of time you must pay off your car. The length of the finance period affects your instalment amount and how much interest you pay.

Paying off your car over a longer period can be tempting, because it reduces your monthly amount and that looks great on your budget, but you could end up paying more interest in the end which means that your car will cost you more.

If you can comfortably pay off your car over a shorter period by increasing your instalment, you will pay less interest overall, which would be better for you in the long run.

Beware the balloon payment

Mogatusi says you must approach a balloon payment with caution. A balloon payment is a lump sum amount that must be paid at the end of a vehicle finance contract. It can be tempting because, at the time of getting your car, adding a balloon payment can reduce your monthly instalments, but you should not be naïve and rather think long term.

The balloon payment means that you are not only paying more interest in total, but it can come back to haunt you at the end of your finance agreement and that could be a financial shock if you did not plan and budget for it.

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Total cost of car ownership

There is a lot more to the cost of owning a car than simply paying your monthly instalments on time, Mogatusi says. You also must budget for the cost to keep it running. You will also have to budget for expenses like fuel, insurance, servicing and maintenance, tyres, tolls and possibly even speeding fines.

Be careful not to overextend yourself by going for a car that has monthly instalments you can only just afford. The other costs may catch up with you sooner than you think.

“Remember, as you start out on your car ownership journey, buy the car you can afford although it is not the car you really want right now. Ask questions and make sure you understand exactly what you need for the best chance to get approved for vehicle finance. You must also have a realistic picture of what you can actually afford and consider all the options before deciding on a new car rather than a used car. Doing all the homework upfront before buying your first car is recommended and could save you some of your hard-earned cash in the long run too,” Mogatusi says.

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