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Best way to approach vehicle finance

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A Fin24 user who has had the same car for 13 years wants to buy a new one, but has a few concerns. He writes:

I am 38 years old and a strong believer that a vehicle is certainly not an asset but a drain on the finances, and therefore hold onto my vehicle for as long as I possibly can.

However, it is with heavy hearts that my wife and I have agreed that the time has come to replace our current vehicle after 13 years.

My question is what approach is the best when applying for vehicle finance?

Our credit records are clear and we have not missed a bond payment, utility bill or debit order for over four years.

We have been clear that we are going to buy a car where the payments will not cost more than 10% of our disposable income, and we have already restructured our budget to allow for this with a cushion for interest rate hikes up to 300 basis points.

This position is very affordable to us.

My question is: while we shop around for the best interest rate, is it best to use an online financing originator or the financing consultant at the dealer?

I am very concerned that these representatives are more likely to punt deals that provide the best commission to the representative, rather than look out for the customer's interesst.

Also, how can I do this with the least amount of damage to my credit record, as I understand that a lot of credit checks on your record are viewed negatively by the banks?

As it is so long since I applied for vehicle finance, are there any new considerations that need to be taken into account?

Rudolf Mahoney of WesBank responds:

Speaking to the finance and insurance (F&I) manager at the dealership allows you to interact with a specialist and clarify any questions you may have.

The F&I can also assess your unique situation and offer you advice on structuring your finance agreement, as well as a range of insurance products relevant to your transaction.

In addition to this, the F&I will facilitate the end to end transaction on your behalf. The main factors that you should consider when financing your car are:

The structure of the transaction  
            
 - Deposit (paying a deposit reduces your monthly repayment as well as the interest on the transaction)
 - Fixed versus linked interest rate (in the low interest rate cycle, most customers are opting for fixed rates)
 - The contract period (remember that a longer period reduces the monthly instalments but attracts more interest)
 - Balloon payment (balloon payments reduce your monthly repayment but attract more interest)

Value added insurance products


 - There is a range of insurance products which covers both the car (warranties, service and maintenance plans) as well as yourself (death, disability and retrenchment cover) to name just a few which you need to consider, depending on your personal situation as well as the car you intend buying.

The F&I is able to submit a single application to all the banks, whereas the alternative is for you to complete individual online applications with each of the banks. The F&I is also able to obtain quotes from the various banks on your behalf, thereby making the process transparent for you to choose the best interest rate.

Judging by the information that you have provided, it appears as though you are very responsible in your credit activity. Therefore, your credit profile should not be adversely affected by the car buying process even if you were to apply to several banks at the same time.

 - Fin24

Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query. 

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. 

Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.





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