The national lockdowns imposed by the government due to Covid-19 negatively affected car sales and consumer confidence waned in the wake of a serious downturn to the economy. Over a year later, there are signs of green shoots in the sector as job creation and disposable income spending slowly start to recover.
Consumers looking to purchase a car will most likely need to apply for finance and we’ve looked at some of the ways to make the process less daunting. The following tips should come in handy:
1. Make sure you can comfortably afford the payments, Wesbank advises potential applicants. It’s important to be honest with yourself about what you can pay towards a car loan. The easiest way to do it is by deducting costs such as food, rent, data, subscriptions and the like from your monthly income. The remaining amount, your disposable income, can be dedicated to servicing a car loan. Working out a clear objective of how much you have available to spend means that when you then submit your vehicle finance application online or at a dealership, you will already have this breakdown at hand for the bank to assess if you can indeed afford the loan repayments on your selected vehicle.
2. Now that you’re aware of how much money you can prioritise towards a car payment, there are monthly costs that need to be budgeted for such as fuel and comprehensive insurance cover. If there is no service or maintenance plan you should also consider putting some money aside each month to cover regular maintenance costs.
3. There are several ways to influence financial institutions to look more favourably, including putting down a deposit towards the loan amount. Paying a deposit reduces the amount of credit required for the transaction, which means lower monthly repayments, less interest and improved affordability. Ultimately, the financial institutions will only approve a car loan once the affordability criteria are met, and a deposit can assist the buyer in this regard.
4. It’s advisable for consumers to pay off any ‘ bad debt’ prior to submitting a car finance application as they might negatively affect the person’s application and credit score. It is important to illustrate how well your money is managed and include monthly payments such as clothing accounts, overdrafts, home loans, personal loans and credit cards.
Crucially, as long as you make your monthly payments on these accounts, your credit profile will be spotless and banks will view you as a reliable borrower.
5. Another factor to aid the process is using a current vehicle to trade-in an existing vehicle. Experts at WesBank mention that if you’ve had your current car for more than four years, chances are that its trade-in value will be more than the money you still owe the bank.
This means you’ve passed the breakeven point for your vehicle loan. It also means that the money you make from trading in your car can be used as a deposit towards your new vehicle purchase. The same is true if your car is paid off: the money you receive from that trade-in deal can be put down as a substantial deposit on the cost of your new car.
“Find a deal that suits your budget and your needs, and use the advice provided to assist you with your next finance application. If you’ve carefully considered your expenses, calculations and affordability range, your application for finance should be approved,” says Lebogang Gaoaketse, WesBank Head of Marketing and Communication.
