Buying your first car is a major milestone on the road to becoming fully independent. But with independence comes responsibility and one of your first responsibilities as a soon-to-be car owner is to ensure that you have the financial means to buy and maintain a car, without getting yourself into serious debt!
For first-time buyers the process of buying a car may seem a little complicated, as you figure out which type of car you want and which financing option would suit you best. You’ll also come across a number of confusing terms, such as residual payment and depreciation.
Luckily the Hippo’s here to help! Below are a few handy hints to get you on the right track.
It goes without saying that you must calculate what you can afford before setting your mind on what you want. Remember to include all the expenses you will incur and not just the obvious ones, like petrol costs, repairs, maintenance, and insurance premiums.
This is vital! The credit score reflects how likely you are to make your monthly payments and is based on a number of factors, including your credit card usage and outstanding loans. The lower your credit score, the less likely you are to get a loan.
Before going through the financial application process, find out how much financing you will be eligible for. Remember you are not limited to just one vehicle finance provider, so shop around a bit!
There are many financing options available, depending on your needs. You may choose to make a hire purchase, which essentially means that you pay the bank a set amount per month, for a predetermined period at a certain interest rate and when you’re done paying it off, the car is yours. Another option is something called a residual purchase, whereby a percentage of your loan has to be paid as a balloon payment at the end of your loan term, in order to secure your car.
Comprehensive car insurance is a prerequisite for obtaining vehicle financing from most financial institutions. Use the Hippo to compare insurance quotes and get the best deal.
Once you’ve gotten your budget nailed and your financing sorted, it’s time for the fun part: going out and finding your perfect car. Although you might be tempted to take the first car you see, try not to rush things. Buying a car is a big investment, so make sure that you’ve considered all the options until you find the one that’s “yours”.
Make a list of the things you look for in a car and take the list with you when visiting dealerships and check out things like appearance, sound system, air conditioning and electric windows. Don’t forget to also consider the less obvious features like safety, fuel economy, warranties and service plans!
The decision to buy a car will have a significant impact on your life and your finances. If you plan correctly however, instead of a financial burden, this can be one of the most liberating experiences of your life.