“Always look at your car purchase as a timeframe. WesBank’s data shows that more consumers are choosing to finance their car over 72 months (six years). So you need to ask yourself what might happen during that time that could affect your budget or choice of car,” says Rudolf Mahoney, Head of Brand and Communications at WesBank. “If you plan on marrying and starting a family, make provision for these costs in your household budget. And also ensure that the car you’re looking at has room for a baby seat and a pram. A little bit of planning could save you a lot of money in the long run.”
You should consider the changes that have taken place in your life over the last five or six years. Now consider how those changes would’ve affected your vehicle purchase, and credit position – and apply the same logic going forward. Six years ago the prime interest rate was 12% and fuel cost less than R8 per litre. Today it’s a completely different picture. Although interest rates have come down to just 9.25%, they are expected to increase again. And the fuel price has risen to more than R12 per litre at the moment – after peaking at more than R14 per litre earlier this year. These are just two examples of costs that can fluctuate and influence your budget.
There are many other examples of changing circumstances that could impact your budget and choice of car – not all of them are pleasant, and they cannot be planned for. Getting married or divorced, getting promotion and a raise or being retrenched, the arrival of an unplanned bundle of joy or a death in the family – all of these will all have a direct financial impact. There are short- and long-term insurance products to manage these situations, and they should be considered where possible. An income protector policy can alleviate some of the financial burden if you lose your job, allowing you to keep your car. And a life insurance policy can help your loved ones take care of debts after you’ve passed.
Even theft or hijacking can leave you with unexpected bills. It is mandatory to have comprehensive insurance on a financed vehicle, which will provide financial cover in such instances. However, an insurance company will only pay out for the market value of the vehicle and this may be less than the outstanding loan amount, leaving an additional amount that will still have to be settled. A gap cover policy can be used to pay this shortfall. WesBank has found that buyers in financial difficulty often choose to cancel their insurance. For this, we have developed a product known as an Outstanding Debt Protection (ODP) policy, which covers the remaining debt on the vehicle in case of theft, hijacking, or a write-off. Sometimes just paying the excess (which fluctuates) can negatively influence your financial situation.
Date: October 28, 2015 10:34
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Alan Straton
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