Don’t get crushed by your car loan! Tips for finding vehicle finance that suits your pocket

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credit score for car loan

Many South Africans simply cannot afford to purchase a car in cash, which is why vehicle financing has become a popular alternative for young professionals. But, even though the money aspect is covered, the whole process can still feel intimidating.

At the end of the day, it isn’t your money, and you still need to pay it back, plus interest. But, there is a way to get your car financed, and still live a well-balanced life without feeling as if you’re being crushed by a car loan. So, before you go purchase your vehicle, follow these tips to ensure you get the best deal, and truly enjoy your new ride without the financial woes.

Always track your credit score

Getting finance doesn’t solely depend on your gross monthly income, and whether you can afford it. No, it’s more than that; for instance, your credit score has a huge impact and can be the reasons for car finances to be declined. This is why you need to ensure that you track your credit score a few months in advance.

Because this will help you to see where your score is, and what you can do to improve it before the lender makes an inquiry. Additional benefits for checking your credit score is that; you can correct any mistakes that can affect your chances of getting selected for financing. And, you can save a lot of money on financing because you’ll qualify for competitive rates.

Set money aside for a deposit

If you’ve read any financial blogs, you’ll see how financial bloggers always stress the fact that you need to save up for a deposit. We know that with the tough economic times in South Africa, it’s hard to save large amounts of money, especially for a big purchase like a car. But, we aren’t saying you need to save up an entire, large sum of money because we understand that it can take you a lifetime.

No, all we’re saying is that you should have some money saved up so you can have less money to pay over your term loan. So, for you to be able to save up for a deposit, you need to evaluate your finances, know the type of vehicle you want and what price range they’re in. From then, you need to decide how much you want as the down payment, and how long it will take you to get to this amount. This will help you to determine how much you need (or can save) and how long it will take. Having an actual plan when it comes to savings can be very beneficial.

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Go for a car you can afford

With the wide range of second-hand vehicles available at your disposal, there is no need to purchase a brand new car. Especially since this is your first vehicle, you don’t want to start off with a high amount of debt to pay up. Another plus is that you get to save the financial and mental burden of financing over five years.

Always remember that it’s important to find a vehicle that fits your budget, rather than having a vehicle that your budget needs to fit. Because that’s how the feeling of being crushed by a loan starts. So, find a pre-loved vehicle that’s affordable and in good condition. Fortunately, with the variety of vehicles these days in South Africa, it won’t be that hard.

Since it’s your first time being on the road, it’s normal for you to get a few dents and scratches. So, the last thing you need is to scratch or dent a brand new vehicle. So, rather become the perfect driver on your second-hand car, and once you’re confident on the road, you can afford a brand new one, then you can purchase a new car.

Ask yourself the important questions before going to a lender

When taking such a big financial step, you need to be prepared before you go to the lender. You’ll need to be specific on what you want and how much you need. But, knowing this isn’t only beneficial for the lender but for you too. Because, when you ask yourself important questions, you’ll get an idea on whether you can actually afford it and if this is the right time for purchasing a car.

For any additional information you need, you can browse the lender’s website. Most of the time, lenders will have their listed requirements on their website so that when you go, you’re prepared to get the best loan terms available. So, ask yourself the following.

  • How do I qualify for a car loan?
  • What documents do I need to buy a car in South Africa?
  • What car can I afford with my salary in South Africa?
  • What is the minimum salary needed to buy a car in South Africa?

Avoid vehicle-related upselling

The automotive realm is known for upselling. And although it’s not bad, it can leave your finances in a grave state. More so, if you’re planning on purchasing from a car dealership because dealerships are always trying to influence buyers to purchase more than what they had budgeted for. This is one of the reasons why people often feel like they’ve been squashed by their first car loan because they’re paying more than what they can afford.

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So, if you aren’t buying from a private seller, make sure you’re assertive and aware of any upselling that comes into play. And, remember that you don’t really need those things. Not only will it help you to save money, but it will help you identify what you actually need rather than what you’ve been persuaded to believe you need.

Think twice before getting into a balloon payment

As helpful as it is, not everyone is meant to have a balloon payment. A balloon payment allows you to get the vehicle of your choice, and pay a smaller monthly payment during your term, while a large amount gets paid off at a later stage.

And, although it seems like a good alternative when buying a vehicle, it does prolong your loan repayment. Now, this can be a problem, especially if you don’t want to have debt for too long. Instead, rather consider an affordable auto loan arrangement that can be paid off within a smaller time frame.

Settle as many outstanding debts as possible

We all know that debt can leave you with money you wish you still had. When you add up the number of bills you need to pay; the realisation hits you as you think of what you could be doing with that money.

So, an effective way to ensure you can add vehicle finance deductions from your monthly salary is to pay off as many debts as you can. Not only will it improve your credit score, but it will also help you free up more money that can be put towards your loan. So, sit down and calculate the total balance you need to pay on any personal loans, store accounts and credit cards.

And, of course, you won’t be able to pay everything off before you purchase the vehicle unless you have small outstanding bills. But, at least you can free up some extra cash. Apart from improving your score, and increasing your chances of being selected, it can help you have more money for any additional car expenses you wanted to add; like comprehensive car insurance or a service and maintenance plan.

Final thoughts

Buying a car, whether it’s a used or new car, won’t be easy. There will be times when you feel as if you’re being crushed by your loan, and that’s normal. Because no matter what you do, there will be a large chunk of money that will be deducted from your salary every month.

However, if you follow these tips and stick to what you need rather than what you want, you will get an affordable deal with the best interest. This will make the whole experience much more tolerable. And, remember that when you pay your debt, it won’t last forever.

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