Vehicle Finance: What Are My Options?

Just as with buying a house, being able to afford a car isn’t as simple and straightforward as it used to be for previous generations. General living expenses and necessities have become increasingly costly, and people are more reliant than ever on the option to borrow funding to buy these vital life assets.

Car financing is a great option to help you get the car you need or want, and today the financing options are very vast and flexible to help as many people as possible make their dreams a reality. It is, however, a very serious contract to enter into, and you should take some time to thoroughly research your options before you dive into signing anything that you’ll be held accountable for the next several years of your life.

Today, we look at your options in terms of car financing and what to expect - and ask about - when you start the application process. With the right financing plan and a bit of savvy preparation, you’ll be able to secure an agreement and get to drive off in that used KIA for sale in no time.

Work Out Your Affordability

Before we even get into the various financing options, you’ll need to know exactly what your finances are looking like so that you can have a fairly accurate estimate of how much you can afford to spend on a repayment plan. Ideally, you should have some funds saved up to use as an upfront cash deposit on the vehicle. That way, the total sum you’ll need to loan to make up the total price will be less, and you’ll have less to pay off each month.

You’ll also score in terms of excess costs from interest rates, as you will end up paying back significantly more to the financial service provider than the amount you initially loaned from them. If you currently have a car and would like to upgrade it to a new one, you could always opt to trade it in at the estimated value calculated by the dealership and then use that value as an additional upfront deposit to reduce your loaned total. Now, let’s look at the various financing options you can consider.

Standard Instalment Agreement

This is the most commonly selected financing plan and typically involves paying off a set amount each month for a period of 72 months. You can opt for standard installment repayments whether you’re able to provide an upfront deposit or not,

Balloon Payment Option

Let’s say you’ve been presented with your financing options and the monthly repayment sum encroaches on being uncomfortably above budget. If you feel you could afford the repayments, but it will mean really tightening your monthly budget and possibly end up not being able to manage any unexpected expenses, the balloon payment option is one worth considering.

This means that your total loaned amount remains the same, but a few hundred or thousand Rands reduce your monthly repayments. The catch is that you will have to pay a lump sum of money at the end of your financing period to make up the total sum that you owe. A standard 72-month repayment plan gives you six years to plan and set aside savings in preparation for that big repayment.

It can be the opportunity you need, and on the surface, it does sound like the easiest option, but it does come with a huge responsibility on your side to ensure that you will have that money ready when the time comes.

Rate Payment Options

Another possibility is to look at fixed or flexible/linked interest rate plans. Throughout your finance repayment, interest rates will rise and fall continuously. Selecting a fixed interest repayment agreement means you’ll have a set interest rate that won’t ever change throughout your loan repayment.

This option gives you peace of mind and certainty about what you’ll have to pay back each month. A linked or flexible interest rate plan means you agree to pay whatever the current interest rate is at any given period of time. This means you’ll pay less in a month when interest rates go down or pay more in those months when they go up. As we can’t predict future changes in interest rates, it might be a bit of a gamble, as you could end up paying more or fewer thanks to the flexibility of the plan. It’s wise to consider whether you could handle paying a few extra hundred Rands in the worst-case scenario if you want to select this financing option.

Full Maintenance Lease

While not as commonly known, this is another option to help you get the car you want. Full maintenance leases are similar to car rentals, except it’s over a longer period of time that’s pre-agreed upon beforehand. You lease the vehicle for a year or two, depending on the type of agreement you make, and all of your service, maintenance, and repair costs will be covered by that monthly lease cost.

There are several benefits to this option: you’ll get to drive a brand new car, and it will likely cost you less than you’d pay in car financing repayments, and you’ll have the option to exchange the car for a brand new model when your lease expires, and you decide to enter into a new one. Bear in mind that you won’t technically ever own the car, but an upside is that you’ll also be able to get rid of it much more easily, as you won’t need to go through the whole selling process later on.

With this background information, we hope that you can make an informed decision and walk away with that used KIA for sale that you’ve had your eye on. If you’re still unsure about what the best solution would be for your needs, feel free to discuss it with your financing provider.