Buying a vehicle gives you independence and freedom. Simply apply for vehicle financing to make this a reality.
So, what do you need to know about financing your car in South Africa?
Buying a car cash is a luxury most of us cannot afford. Thankfully, there are other financing avenues available that makes it possible to have your own set of wheels.
Banks and other financial institutions offer various vehicle loan options to consumers, you just need to find a loan right for you. It is important that you understand how the car financing process works. This enables you to follow through the loan application procedure smoothly and have the car of your dreams in no time at all!
Applying for a car loan gives you independence
Car financing is not a complicated process, and we are here to help you understand exactly what the different terms mean, your interest rate options, car financing options as well as other car financing related specifics such as balloon payments, servicing plans and more.
Applying for car finance
If you are applying for finance through a bank, it is advisable to first decide what it is that you can afford and what car you would like to buy. The bank will process your car loan based on the above.
If you opt for financing through your car dealership, a representative will more than likely finalise all loan application procedures on your behalf.
What is a car loan repayment term?
The repayment term on your vehicle loan can be between 12 to 72 months. A longer repayment term allows for a smaller, more affordable repayment amount, which will be scheduled to be repaid on a monthly basis.
The interest rate your receive on your loan will determine the total amount of interest you will be paying on your loan.
The two main types of interest in fixed and linked
Fixed interest rate – A fixed interest rate will ensure that your monthly repayment amount stays the same during the duration of your vehicle loan term. It helps you better budget for your repayments, and safeguards you from any nasty surprises as a result of a fluctuating interest rate. The one drawback is that you will not benefit from a lower interest rate should the prime interest rate drop. A fixed interest rate is a better suited option to consumers who are on a fairly strict budget.
Linked interest rate – A linked interest rate option on your vehicle loan will mean that your interest rate is linked to South Africa’s prime lending rate. Although there is a risk of an increase in the prime interest rate, and thus your instalment there is also the possibility of a drop in the interest rate, which means a drop in your monthly loan repayment.
It all comes down to how big a risk you are willing to take, and which option suits your requirements. For example, does your budget allow for you to take a risk should your monthly quick loan repayment increase?
Is a balloon payment option for you?
Otherwise known as a residual, a balloon payment is a certain percentage that is deducted from the finance amount. However, the balloon payment amount will be due as a lump sum at the end of your loan repayment term.
Why do some people choose a balloon payment option? Well, the total amount of interest charged is less and your monthly instalments are more affordable.
Car dealerships and vehicle financing explained
Getting car financing through a dealership can make the process of owning your own vehicle much easier, and quicker. We advise you to ensure that your dealer of choice has a representative that is FAIS-accredited and lawfully compliant.
General supporting documents needed for a car loan
- South African green bar-coded ID
- Valid driver’s licence
- Latest three payslips
- Latest three months’ bank statements
- Proof of residence that is not older than three months
By having all the necessary documentation ready, you will speed up the process of applying, and being approved for a vehicle loan in South Africa.
Why is insurance important?
Financial institutions only approve loans provided that you have comprehensive car insurance. Shop around for quotes to ensure you are receiving the best deal available.
Overview of car loans
- Paying a deposit when you apply for a car loan reduces your repayments and the interest amount, making it a sound financial choice when purchasing a vehicle.
- Keep in mind that you will have to choose between fixed and linked interest rates. Ensure you choose the best option to suit you.
- Consider the repayment period, if you are able to repay your car loan over a shorter term, you will save money.
- If your budget is narrow, you always have the option of a balloon payment, which lowers your monthly repayment and you end up saving on the overall amount repaid.
Get your set of wheels today! It is as easy as applying for an easy online loan and finding the best vehicle option from South Africa’s most reputable lenders.