Tips for purchasing & financing your car


Car manufacturers are in the business of selling cars. So, in most instances, the ‘finance deals’ they offer consumers are only to increase sales. From a personal finance perspective, most of these deals are not in the best interests of consumers. 

Here’s an example from Mercedes Benz Financial Services in December 2014: “No deposit. Pay first instalment in April 2015.�? Another example is from Audi Financial Services, also towards the end 2014: “10% deposit. 35% residual. Finance over 60 months.�? What these deals have in common is consumers paying very high interest on taking up these “not to be missed and not to be repeated�? deals.

Factors to consider when you buy a car

  1. Do some research on the car’s fuel efficiency.
  2. Decide whether you want to buy a brand new car or a used one.
  3. Consider, given your monthly budget, how much you can afford to pay towards, the monthly finance instalment, fuel, toll fees, insurance and general maintenance.
  4. Have you saved for a deposit to put down? Ideally you should have at least a 10% deposit.
  5. What period are you going to finance the car over? Ideally for a 2-year old used car, it should be no more than 36 months and 48 months for a new car.
  6. Think very carefully about using a balloon payment or residual in the financing deal.
  7. Check by how much the monthly instalment will increase if interest rates go up, by say 1%.
  8. Shop around for car insurance.


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