5 Steps to Buying Your First Car

Everyone dreams of owning a car: four wheels of freedom can take you anywhere you choose (with space for a few friends to accompany you, too). But buying your first car is a big financial decision and there are a few important things you need to think about before driving off into the sunset in your first set of wheels.

Do your research

What do you need, bearing in mind that “want” is a different matter altogether? Be reasonable and practical, and don’t buy the first car that comes your way. Find out if you know any car fundis in your social circle, hunt around online, and carefully weigh up the price, age, mileage and mechanical state of several cars before making your choice.

Avoid debt

If you’ve just left university or are still in the early stages of your first job, it’s important that you hang onto every rand you earn. Resist the urge to buy a hugely expensive, flashy car with steep repayments. At this stage of your life, a good second-hand car is a far more sensible financial decision. If you’re able to save up and pay for a car in cash, that’s first prize; second is securing vehicle financing at a low interest rate. Speak to the finance and insurance representative at your dealership, and get quotes from banks and other lenders. Try and put down as large a deposit as you can afford initially, and stay away from longer finance periods and balloon payments.

Decide between a dealership and a private seller

Both have their pros and cons. While dealerships are legally obliged to guarantee against stolen vehicles and usually offer a limited guarantee (this means the dealership will rectify certain problems if they appear within a specific timeframe), buying a car through them is usually more expensive than buying one privately. Scammers, however, often work in the used car space, and banks don’t finance private sales. If you do go this route, you’ll either have to pay cash in full or take out a personal loan. If you opt for a private sale, do some background research first and get a mechanic to check out your car.

Budget carefully

A car is a liability, not an asset. This means that it loses value over time rather than gaining it. Also, owning a car means you’re in for monthly expenses such as instalments, insurance and petrol, and unexpected costs such as replacing tyres, fixing dents or dealing with inevitable wear and tear. Make sure you factor for these costs in your monthly budgeting.

Insurance

Your car should be insured from the moment you get behind the wheel. In the event that you’re in an accident, you’ll still be liable for your car and (if the accident is your fault) for any damages caused to other vehicles, too. You also need to make sure you’re covered if it’s stolen – whether it’s parked at your home or somewhere else, or if it’s hijacked while you’re in it.

A car is a huge ticket to personal freedom, and in financial terms, it’s also an opportunity for you to develop a strong credit profile. Making your payments on time and in full will prove to your bank that you’re a responsible borrower, which will help when you’re in a position to make your next major financial decision, such as buying your first home.

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