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The best car is a paid off car

Beyond the thrill of collecting your wheels from a dealer lies a world of responsibilities.

Whether you’ve bought a pre-owned or new, chances are you’ve had to finance its purchase through a loan. In effect, that means that the car isn’t really yours. Until it’s paid off, it belongs to the financing company – which may be a bank.

So, even though it might be tempting to open up the taps and see what the performance package you paid extra for can really do, it really is in your own financial interests to be as safe as possible on the road.

Dangerous curves ahead

Granted, that isn’t always easy in South Africa. Between unforgiving potholes, robots that are affected by load-shedding, and other drivers who forget the rules of the road anytime there’s a drop of rain, things can feel perilous for even the most experienced of drivers.

You may, of course, take some comfort from the fact that your vehicle is comprehensively insured. What you may not realise (or have put to the back of your mind), is exactly what happens if you are in a serious accident or your car is stolen, even if you are insured.

“If your car is written off, for example, the bank will be paid whatever’s still owed on the vehicle,” says Christiaan Steyn, head of MiWay Blink.

“If you financed the car with a big balloon payment or over a very long term the amount owed to the bank could be bigger than the insured value of the vehicle. That can leave you in a much worse place when it comes to buying a replacement because not only are you left without a deposit to put down on a new vehicle, but you still have to settle the outstanding amount on the old vehicle first.”

The same applies when a car is stolen, although you will have to open a criminal case, which must then be reported to the insurer.

Prevention helps

Fortunately, as Steyn points out, drivers can go a long way to avoiding those scenarios.

“Ensuring that your car is parked somewhere safe at night and when you’re at work is something you can control,” he explains.

“Also, be conscious of your driving style and of the speed limits. If you drive carefully and respect others on the road, there’s less chance of causing an accident.

“It is also advisable to have credit shortfall cover in place with your comprehensive car insurance. Credit shortfall covers the difference between the insured value and the amount still owed to the finance house when a vehicle is written off or stolen.

“A car is the second most expensive purchase most of us will make after a house.

“As exciting as driving off in a new vehicle may be, drivers need to remember that it’s also a big responsibility. By taking the right precautions, they not only make themselves less vulnerable to accidents and theft but can also put themselves in a much better financial position should the worst ever happen.”

Source: Irvinepartners

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