Vehicle finance tips - What the brochure doesn’t tell you

Marius Roberts, respected motoring expert, well-known television presenter, and self-confessed straight shooter, shares what the sales brochure doesn’t tell you, and how to prepare for some of the hidden costs when buying a car in South Africa.

“There are many pitfalls,” Marius states. “I think the onus is on each of us to be more educated. Be aware of all of our available buying and purchasing options and obviously be aware of things that could potentially trip you up.”

The first consideration is services and warranties. “South Africa is one of the only countries in the world that actually sells a service plan with the car. Thanks to the Consumer Protection Act, car dealers are no longer allowed to bundle deals. So when you are buying a car, that list price of the car should be the base price of the car less the service plan. But, for most consumers, the service plan is peace of mind. It’s not. Peace of mind is your warranty. The warranty comes standard from the factory. No one can take that away from you.”

He suggests that you carefully evaluate the value of service plans. He explains. “Do you go to your doctor and say, hey doc, here is money upfront for the next five years for visits that I may be doing or will be doing once a year? You keep it. Of course, you are never going to do that. Yet it’s exactly what you do when you buy your car. You take the service plan and add it onto your finance deal. Why not rather take that money and put it into your own interest-bearing account?.”

According to Marius, service plans are generally not worth it. Rather, putting funds aside to cover your car’s maintenance schedule in an account that earns you interest, instead of paying interest on financed service plans, can save you money.

“You do not lose peace of mind because you still have the warranty. The service plan is literally there for you when you go once a year for your service, whether it be a minor or major,” he says.

Last year in South Africa, the ‘right to repair’ also came into play. This means that when you purchase a new car from a dealership, you no longer need to service that car at that particular dealership. You only have to keep the car serviced at a reputable dealership (they will give you a list).

He notes, “Ask the dealer what the base price is for a minor service and a major service and then do the same thing with a reputable aftermarket service centre. Compare those two... I can tell you now you can be saving money here big time. You do not need to take a service plan and add that onto your three, five, or seven-year term.”

Although he confesses it could sound old school, he’s always believed that if there is a car you want, you should go and price that car without a deposit, with full interest. “What is that going to be? Can I afford it or not? The minute you start slapping 20% into a balloon payment to make it affordable, you are looking for problems. For me, a balloon payment on a private deal is really something you need to steer away from.”

In a business environment, there are some lease deals with balloon payments that might work. “But you need to be so careful on those lease deals because they are based on buyback. Those buybacks are listed and closely linked to kilometres. The minute you go over those kilometres, you are in for a world of trouble, because you literally are going to be paying big time on that.”

He says that it’s important to think of the future, not just about the now. “With interest increasing, you might find yourself in a position where you can no longer afford your car payments. With a balloon payment, getting out of it is going to be really, really difficult.”

In South Africa, you are required to have car insurance when you buy a car, but no one follows up with you to make sure that you maintain that insurance.

“Never cancel your car insurance, just to make it more affordable. What happens when you have an accident?”

“I see this all the time,” he states. “If people can't afford the car, the first thing they cancel is their insurance. What happens when you have an accident and that car gets written off? You are going to be without a car, but still committed to making your monthly payments. That is really a position you don’t want to find yourself in. So please, never cancel your car insurance, just to make it more affordable.”