Buying a new car? First read this

Whether you’ve decided to downsize to save money or to buy a bigger car to accommodate your changing lifestyle, it’s easy to be seduced by newer stylish cars and all the added extras. However, it’s important to know what you’re looking for, so you don’t end up buying a car well over your budget.

Barend Smit, marketing director of MotorHappy, a supplier of motor management solutions, offered us four key tips to consider before buying a new car:

1. Take into account the vehicle’s depreciation rate

A car’s depreciation rate is the decrease in a car’s value over time. Many motoring experts will agree that choosing a car that holds its value well could deliver significant savings over time. A car’s depreciation rate is determined by its desirability, size, and vehicle type. When you decide to sell your car, the mileage, fuel efficiency, reliability, number of owners and general condition will also contribute towards the depreciation.

If you do plan to buy a new car, first check the car’s depreciation rate. There are a lot of online calculators where you could check your car’s depreciation rate, simply Google “car depreciation rate calculator”. This can be helpful when deciding between two similarly priced cars, as you may want to choose the car with a lower rate of depreciation.

2. Research, research, research 

Go online to check out any reviews on the make and model – not only in South Africa but all over the world. Ask your friends and family what they think of the car, and don’t forget to chat with a qualified professional too. Certified mechanics who are not affiliated with the dealership might be able to share some valuable information.

“Don’t forget that a thorough test drive is also part of your research. Test drive more than one car, drive on the highway, drive on quiet suburban roads – even take passengers along with the drive,” says Smit.

“In most cases, you’ll be stuck with the car you buy for quite a while, so you might as well take the time to do your research.”

3. Don’t be seduced by the extras

Decide on your budget before you get to the dealership, and don’t be seduced into those extras. It’s the car salesman’s job to try to sell you some extras that you probably don’t need. Remember that a car costs more than those monthly instalments – you need to factor in insurance, maintenance, and fuel costs.

“If you are buying a used car, consider investing in a Maintenance Plan. This takes care of all car services, as well as unscheduled repairs, parts, and labour,” he says.

4. Before you sign, look at those numbers again 

Pay attention to the financing terms. It makes no sense to negotiate the price down but then pay more long-term. If you’re buying a car through financing, shop around for a good loan. You can either take out a finance agreement that will result in your car being paid off at the end of the term (e.g. 60 or 72 months), or you can lower your monthly instalment by opting to have a balloon payment at the end of this period. This will be an amount that you’ll still owe at the end of your financing period. You can then either sell your car to pay off this amount, or re-finance it and take out another loan, assuming you don’t have the money available to pay it off yourself.