Financial tips to consider when buying a new car
|Published
By Wynand van Vuuren
More than half a million South Africans bought new cars during 2023.
This is despite ever-increasing interest and inflation rates, and soaring cost of living, fuel, and car prices.
And yet, even with around a million road accidents being reported annually, only 35% of South African motorists have insurance.
This means that, if you’re unlucky enough to be in an accident, there’s a high probability you won’t be able to claim against the other driver for damage to your car – even if they are at fault.
If you cause an accident and you’re one of the uninsured drivers, you’ll be personally liable for all of your damage, as well as any third-party damages.
So, given that buying a new car is an expensive exercise, and insuring it is an essential additional cost, how do you ensure that the car you buy suits your needs and your budget in the long run?
Below are some tips to help you:
Ask the right questions: If you’re financing your new car, shop around for the best interest rate.
Figure out whether you can afford the repayments if the interest rate continues to climb. Ask for a breakdown of how much interest you’ll save if you pay the car off sooner.
Check whether you can fix the interest rate for the duration of the finance period.
Factor in the insurance: If your car is financed, you must have comprehensive insurance for it. You won’t be able to drive it off the showroom floor without having proof that it’s insured.
Of course, the other good reason for having comprehensive insurance is so that you can claim for loss and damage if your car is stolen or hi-jacked, damaged or written-off in an accident, or gets dented by hail, among other things.
Check the warranty and maintenance contracts: Most new cars come with a manufacturer’s warranty or maintenance contract, which cover the cost of regular services and parts that fail to work as they should.
If you’re buying a car without these contracts, you’ll need to factor saving for its maintenance into your monthly budget.
Don’t forget your fuel costs: If you drive long distances, or if all your driving is in stop-start peak-hour traffic, it’s worthwhile to check a car’s fuel efficiency before buying it.
Take your lifestyle into account: If you head for hills on weekends with your bike on the roof-rack, a low-slung sports car isn’t going to be your best bet.
Likewise, if you’re planning on starting a family any time soon, a convertible wouldn’t be a good buy.
And, if you do most of your driving in peak rush hour, an automatic model would be a lot easier to drive than one with a manual clutch.
Before you sign on the dotted line for a new set of wheels, make sure you’ve ticked all the boxes and checked your budget.
Insurance is seen by many as a grudge purchase but you’ll be grateful you have it, when you need it the most.
The last thing you want is to commit to an asset that you can’t afford in its entirety.
Wynand van Vuuren, client experience partner at King Price Insurance.
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