Buying a car is one of the most important financial steps you can make. Not only is a car a means of transport, but it can also help you capitalise on opportunities for employment or work that can help you progress.
However, a car shouldn’t be regarded as just a utility – it can also be a liability that involves maintenance, care, and consideration when preparing your budget. Keeping a vehicle in roadworthy condition can be expensive, and for that reason it’s important to ensure that you purchase a vehicle that’s aligned to your needs.
In this guide, we’ll discuss what you should consider when purchasing a used vehicle – and how you can set yourself up for success.
Set up a budget, and plan for:
If you’re preparing to purchase a used vehicle using credit, it’s important to ensure that you understand the terms of your credit agreements and budget for monthly repayments effectively. Typically, most credit providers will enable you to finance a vehicle that is no older than seven years within a mileage range of up to 200 000km. The amount you repay each month will be dependent on the final purchase value of the car you buy.
Vehicles require constant maintenance to function at their best – and you will need to set aside funds to ensure that your car is in good working order. Not only will you need to budget for annual services, but you’ll further want to set up an emergency fund for consumable purchases such as tyres, brakes, shock absorbers, lights, or other features you car may have.
Insurance and motor warranties, if applicable
It’s always a good idea to insure your vehicle, as this can help settle the expense of repairs or (in some cases) cosmetic work. Having an active insurance policy can also enable you to fund emergency expenses if you are involved in an accident.
Motor warranties, servicing, and maintenance plans can also help you budget and manage the cost of your annual services or can also enable you to settle the costs of certain wear-and-tear expenses.
Naturally, your vehicle will require petrol or diesel (or in some cases, electricity) to run – making it vital to understand how much fuel your car may consume over a monthly period. Bear in mind that the cost of petrol and diesel are not fixed and can rapidly change – keeping an eye on these figures can assist you when managing your cash flow.
Research and understand your needs
Shop online and offline
While many physical dealerships will offer you great value on a used car and may even offer brand-sponsored maintenance or service plans, you may also be able to find a bargain online from a private seller.
Visiting online directories such as Gumtree, Facebook Marketplace, or WeBuyCars can also enable you to expand your search and have exposure to vehicles you otherwise may not have seen.
Thoroughly inspect the car you’re interested in
Go for a test drive
Before committing to a purchase, it is absolutely vital to test drive the vehicle you’re interested in to make sure that the car itself appeals to you and matches all descriptions that have been provided to you.
If you can, opting to test drive the same make and model of car as a new model is also a good idea, as this can give you perspective on the wear and tear of the used model you are interested in.
Examine the service history and accident reports, if applicable
The seller of a second-hand car should be able to provide a full or partially full service history for the vehicle in question – and if the car has been rebuilt as the result of an accident or some other form of damage, you have the right to request to view these records as well.
Ask for a DEKRA road-worthy assessment
Once you’ve found a car you are interested in, you can also request that it undergoes a road-worthy assessment at a local DEKRA branch at your own expense. This can help you identify any potential problems with the vehicle – and while all used cars will have some degree of wear and tear, understanding these issues can give you an idea of any potential problems (and subsequently expenses) that you may face.
Plan for initiation fees
Lastly, once you are ready to commit to finance your used vehicle, prepare your budget and expect to settle initiation fees when you commence your finance plan.
Understand your balloon payment, if applicable
If you opt to finance your vehicle with a balloon payment, this essentially means that you opt to defer a lump sum payment at the end of loan term with the view of lowering your monthly instalment. While this can help you afford manageable monthly repayments, this also means that you will be required to settle or refinance that same lump sum within a period of months.
If possible, negotiate your finance plan without a balloon payment – or, if this unaffordable, make sure that you set aside enough money each month in addition to your repayments to settle the balloon payment when it is due.