Vehicle Finance up to R250 000
Vehicle finance can become a solution if you want to buy a new car.
In a perfect world, you would be able to buy your dream car upfront with the money in your pocket. But the truth is most of us just don’t have that kind of cash. So, let’s take a look at some of the manageable ways to finance a car in South Africa today.
- ✔ Low interest rates
- ✔ Quick loan offers
- ✔ Free application without commitment
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Loan amount R100 - R250,000. Repayment terms can range from 3 - 72 months. Minimum APR is 5% and maximum APR is 60%.
Vehicle Finance Meaning
Car financing basically means you borrow the money from a company to buy the car and agree to pay back the car loan along with the interest. Instead of paying one big lump sum, you are actually buying your new car in affordable, monthly instalments.
A clear credit history, consistent monthly income, and your employment status are important factors when for applying a vehicle finance. Standard car loans can range from one month to 10 years, although the average is 72 months. With vehicle finance, you can buy a car, a truck, a boat, or even a motorbike.
You probably have a good idea of the vehicle you want to buy. Now, do the math to work out what you can afford. Take your monthly net income—your take-home pay–and subtract your monthly expenses. The result will show you what payments you can realistically manage monthly.
Now you are ready to start looking for the vehicle that best suits your lifestyle, your needs and your budget. Take into consideration that the car’s model, production year and type can affect the loan’s approval.
The next step is choosing how you want to finance your new wheels. Like all loans, the amount of finance you qualify for depends on your unique situation. How much you earn, your credit score and how much you can put down for a deposit are all factors that will affect your options.
You will need to take a careful look at the different choices and compare the interest rates, the loan length and the type of vehicle financing. Using a loan comparison tool will let you make an informed decision.
Vehicle Finance South Africa
Vehicle financing is a form of secured loan as the car you are purchasing becomes the collateral for the loan.
Because secure loans are safer for the lender (less risk), they are more affordable for the borrower as the interest rate is lower. The only drawback is that if you fail to pay, you are in danger of having the creditor claim your vehicle.
After you have worked out what you can afford and what type of vehicle you want, you need to fund your purchase. Although dealers will suggest companies that provide finance, you should always do your research first. Comparing offers lets you find the best plan and instalment rate to fit your circumstances.
Three factors influence your monthly payments:
- Loan period
- Interest rate
- Deposit paid upfront
The length of the loan, or loan period, impacts your premiums. When you pay over a long period, the monthly instalments are less but you pay more interest overall.
Your credit score plays a big part in determining the interest rate offered to you. A good score means less interest because the lender will consider you a low-risk client. A good credit score demonstrates that you pay your bills on time.
A deposit is not usually a requirement for vehicle financing. However, your financial circumstances and the finance company’s terms of agreement will determine this. Putting a deposit down on a vehicle reduces the loan amount and makes the monthly instalments lower.
How to Finance a Car?
The South African car market has two main options when it comes to vehicle financing. Each one offered has advantages, but also comes with disadvantages, depending on what your needs are.
Instant or Installment Sale
The Installment Sale Agreement is the traditional car finance model. This is the most popular in South Africa and is basically a hire purchase agreement where the buyer takes out a loan to finance the vehicle’s full purchase price.
An instalment sale is a flexible option that has some other modifications to reduce the amount borrowed. When used in conjunction with a balloon payment–see below— or a deposit to decrease the total monies owed.
At the end of the repayment term, when the loan is fully paid, the vehicle ownership gets transferred from the lender to the buyer who then becomes the car’s owner.
Car Lease South Africa
The Car Lease Agreement is another popular way to finance a vehicle. It offers a solution for buyers who need or want to change their vehicles more frequently.
The average term for vehicle finance is 72 months. The car lease agreement caters to buyers who want to change vehicles often without being subject to penalties.
Leasing a vehicle has its pros and cons.
On the pro side, buyers get newer vehicles more often. Contract terms are shorter, and the payments are more affordable. With the right agreement, insurance and maintenance are include and there is no risk of balloon payments.
However, there are some cons. The client never owns the vehicle and there is a limit in the contract as to the number of kilometres that can be driven. Go over that limit and there will be penalties to pay. Penalties are also incurred with early termination of the contract.
Car Finance with a Deposit
Putting up a deposit for your vehicle purchase is not mandatory in South Africa. There’s no rule although it makes good financial sense because, the larger your deposit, the lower your monthly payments.
If you have an existing vehicle, you can trade it in as all or part of your deposit.
Faster loan approval is another perk when you put down a cash deposit. It certainly helps you to get your loan approved by the lender and shows that lending to you is less risky. Without a down payment, you must borrow the full amount from the bank or financial institution.
If you’re buying a car, whether new or used, there are no regulations about a compulsory deposit to make the purchase. But the reality is, with a deposit you end up paying less interest. More money down means less money borrowed from the lender, saving you more on the interest payments on the loan.
- You are over 18 years old
- You are employed and employment has lasted for more than 6 months
- Your loan should not be more than 8 times larger than your monthly income
Another balloon payment meaning is a Residual Purchase Agreement. While it functions in the same way as a Deposit, there is one major difference. After paying your monthly instalments every month for the set period of the contract, there is a final big payment due at the end of the term.
This payment, usually called a balloon payment, is there to reduce the monthly instalments on a vehicle. Once you have made the payment, the vehicle becomes yours.
If you are unable to meet this payment, you have two options. One is to refinance the balloon payment or, the second option is to give the vehicle back to the lender at the end of the monthly payment term. Doing this will release you from any other payments.
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Credit Score Check & Vehicle Finance
Applying for financing will always involve a credit check where the lender evaluates your credit history and credit score to calculate the risk involved.
Car Finance when Blacklisted
You might wonder if there are any options for buyers with poor credit or worse? There are several options but it’s still possible to apply for car finance even though your credit rating is bad, or you have been blacklisted.
Even with less than stellar credit, some credit providers and microlenders will agree to provide you with a finance plan. They don’t just look at your credit report but also your income versus your expenses and examine your spending habits to establish if you are a risk.
Your credit history is an ongoing record of your debts, how well you meet your payments and any public records such as judgements against you. Your credit history is one of the factors used to calculate your credit score.
Vehicle Finance Calculator
Arcadia Finance vehicle finance calculator can help the borrower easily compare lenders’ terms and conditions. As the result you can get a loan that suits you the best.
Car Loan Requirements
To qualify for a car loan in South Africa, you must be over the age of 18 and have the following documents:
- A certified copy of your Identity Document or Passport
- Proof of income
- Proof of address