Vehicle Finance is a type of loan that you get directly from the bank, dealer or finance company. Therefore, instead of a once-off big expense which is hard to attain, Vehicle Finance enables you to pay for your dream ride in monthly instalments over a period of time. It is the fastest and easiest way to buy a car as you won’t have to pay for the vehicle upfront.
Although it’s not a requirement, it might be a good idea to get a copy of your Credit Report before making a major purchase such as buying a new vehicle. Your credit record is one of the primary factors that determine the financing terms for which you are eligible. A good credit status could help you get higher credit limits and lower interest rates.
You can get your Credit Report from one of the four major credit bureaus online. To get your comprehensive and easy-to-read Credit Report, click here.
An instalment agreement is a contract between you and the bank in which you agree to make monthly repayments for a specified amount over a specified period. You drive the vehicle that you’ve purchased but it remains the property of the bank until you have finished paying it off. At the end of the specified period, once all the monthly payments have been made, you will get full ownership of the vehicle. The interest rate applicable on the instalment agreement can either be a fixed interest rate or a variable interest rate.
A residual purchase agreement is a contract between you and the bank in which a portion of the loan is paid in monthly instalments over a specified period, and a larger once-off payment is made at the end of the loan term. This final payment is also known as a “balloon” payment. Let’s look at an example: You buy a new car for R200 000 over 5 years and decide to have a R50 000 (25%) residual value/balloon payment on your loan. At the end of the loan term, you’ll still owe the bank R50 000. While a balloon payment can lower your monthly instalment, you will still need to pay the balloon payment at the end of the term in order to get full ownership of the vehicle.
A fixed interest rate is where the borrower locks into a specified interest rate at the origination of the loan and the rate does not change during the term of the loan. A variable interest rate, however, is linked to the prime rate and fluctuates as the prime interest rate goes up or down.
This will depend on your financial situation, but in most cases a deposit is not required. It is, however, advisable to put down a deposit in order to make the loan amount less as this could help you save on your monthly instalments.
Luckily, you can find the perfect vehicle online with Hippo Cars. Visit our online showrooms and find your dream ride in a location near you. Plus, you can access Hippo Cars via any Internet-enabled device. It’s perfect platform for you to find that dream ride within your budget.
Market value takes into account your vehicle’s age, make and condition. It’s the current price at which you can sell your vehicle, if you were to sell your car privately. The market value is usually the average of the retail value and the trade value added together. If the retail value is R330 000 and the trade value is R264 000, then the market value is R594 000/2 = R297 000.
Yes, most Vehicle Finance providers would require you to have Car Insurance. Car Insurance covers you in the event that your vehicle injures another person or damages their property. Depending on the type of Car Insurance you choose, it can also cover your vehicle against losses due to theft and/or damages. It is important to find out what the cost of Car Insurance is, so that you can factor that into your budget along with the monthly instalments and other costs such as petrol and a Service Plan. Luckily, you can compare multiple Car Insurance quotes from leading South African brands online. Compare with Hippo.co.za and you could save hundreds of Rands per month*. To get Car Insurance quotes, click here.
There is no right or wrong answer here. There are many variables to keep in mind like your vehicle’s age, make and condition as well as your specific needs when it comes to Car Insurance. Depending on whether you choose to insure your vehicle at retail value, trade value or market value, your premium can either be higher or lower. Retail value is the closest in price to your car’s replacement value but since it is likely to be a higher value than the trade or market value, your premiums are also likely to be higher, but the payout in the event of a claim will, however, also be higher.
If you insure your vehicle at trade or market value, you will likely pay a lower Car Insurance premium, but you will then be insured for a lower amount too. In the event that your vehicle is stolen or written off, you will likely not receive the full replacement value of your car.
You’ll regularly have to update your insurance policy to take depreciation into account. Let’s look at an example: You insure your Toyota Corolla at a retail value of R260 000, but due to depreciation the car retails at R208 000 a year later (20% depreciation). Your insurer will then pay out R208 000 and not R260 000 in the event that your vehicle is stolen or written off, even though your insurance premiums are likely to stay the same. That’s why it is a good idea to compare Car Insurance quotes once every year. Plus, you could be saving hundreds of Rands per month* if you compare Car Insurance quotes with Hippo.co.za.
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*Savings amount based on 2017 research by Kaufman Levin Associates. Risk profile dependant.
Hippo Comparative Services (Pty) Ltd is an authorised financial service provider. FSP number: 16357. 1 Telesure Lane, Riverglen, Dainfern, 2191.