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A Fin24 user is worried that there may be disadvantages to paying cash for a car. He writes:
I would like to know if there is any disadvantage to buying a car with cash.
I am saving up and by the end of the year I will have half of the cost of the car I want. I am now thinking of saving until the end of next year, so that I can just buy it cash.
Is there anything I should know before doing so?
George Simitopoulos, director of Carfin Vehicle Finance, responds:
It is always better to buy a vehicle with cash, but cash purchases of this size are not a reality for most of us. In the current economic environment, we feel that it is better to have savings for a rainy day and to use best practice decision making to find the vehicle finance loan which works best for you.
My advice to you is to apply for vehicle finance and put down a deposit of no more than R15 000.00.
Then, if you qualify for finance and you've signed a contract, phone the bank to increase your monthly instalment on their system. By doing this, you'll pay off your vehicle much quicker.
Example
Sipho financed a 2005 VW Polo 1.4i Comfortline for R60 000 at 11% linked interest rate. His monthly instalment for 60 months will R1 305 per month.
Sipho phoned the bank and increased his monthly instalment to R1 600 per month. By doing this, he will pay off the capital amount much quicker and accumulate less interest.
He will now pay off his vehicle in less than 49 months.
- 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.
I would like to know if there is any disadvantage to buying a car with cash.
I am saving up and by the end of the year I will have half of the cost of the car I want. I am now thinking of saving until the end of next year, so that I can just buy it cash.
Is there anything I should know before doing so?
George Simitopoulos, director of Carfin Vehicle Finance, responds:
It is always better to buy a vehicle with cash, but cash purchases of this size are not a reality for most of us. In the current economic environment, we feel that it is better to have savings for a rainy day and to use best practice decision making to find the vehicle finance loan which works best for you.
My advice to you is to apply for vehicle finance and put down a deposit of no more than R15 000.00.
Then, if you qualify for finance and you've signed a contract, phone the bank to increase your monthly instalment on their system. By doing this, you'll pay off your vehicle much quicker.
Example
Sipho financed a 2005 VW Polo 1.4i Comfortline for R60 000 at 11% linked interest rate. His monthly instalment for 60 months will R1 305 per month.
Sipho phoned the bank and increased his monthly instalment to R1 600 per month. By doing this, he will pay off the capital amount much quicker and accumulate less interest.
He will now pay off his vehicle in less than 49 months.
- 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.
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