Own your dream wheels without breaking the bank

2012-02-11 10:53

The best way to afford the car of your dreams is to buy it second hand.

Most cars devalue by about 25% the minute you drive them out of the dealership. On a R150 000 car, that
is a massive R37 500. Is the smell of a new car really worth that kind of dough?

Not only does buying a second-hand car save you money, but it also allows you to buy the car of your dreams without signing up to ridiculous payment terms like 72 months of finance or residual payments.

For example, if you have your eye on a BMW 320i – it will currently set you back about R320 000, but according
to Autotrader, you can pick up a three-year-old model for R180 000.

Believing that you have to buy a new car every five years is nothing more than a marketing ploy by car dealerships. They argue that once the car is out of its motor plan it becomes too expensive to maintain and becomes unreliable.

They also argue that the resale value falls significantly. That may be true if you plan on selling in five or six years, but if you take a 10-year view, the relative devaluation is nothing compared to the financing costs.
Gary Roland, spokesperson for Automobile Association (AA), says cars are built to last a lot longer than we realise.

He said: “We tend to believe that once a car has done 100 000km it is not worth keeping. But cars, even the cars built 70 years ago, are made to last at least 200 000 miles which is the equivalent of 320 000km.”

So that three-year-old BMW with 80 000km on the clock is going to last you at least another seven years before it would need any major repairs.
If you buy a good and quality car, you could hold onto it for 10 years and save a significant amount of money.
Cars that are known for their reliability include models like Honda, Toyota, Ford, VW, Volvo and Mercedes-Benz. Just look around you and you will see many older models of these brands still going strong.

One of the arguments for buying a new car every five years is that the motor plan expires and you now have to pay the running costs.
Roland says this may be true of fully-imported cars like a Saab or a Volvo, but if you buy a locally manufactured car or one that has been a very popular model, spare parts are widely available and your costs on repairs and maintenance will be lower.

Buying a new car:
Take, for example, a brand new VW Polo sedan 1.4F which will set you back R160 000 or R3 400 per month if financed over 60 months.

Four years later when you buy a new model of the same car and based on inflation, the price is now R215 000.
You are able to trade your old car in for R65 000, so you need to finance R160 000 which costs you R3 190 per month or R38 280 a year.

Keeping it for 10 years:
Once you are out of a motor plan, according to the AA rates your maintenance costs will be 20c/km.

If you drive 1 000km a month, you will spend about R2 400 a year on maintenance costs.
Even if you take the maintenance into account, you will be saving R3 000 a month without having to finance the car. Over the five-year period, that is a massive R180 000.

If you just saved half of this each month (R1 500) for five years in an investment that earns 10%, it would be worth R131 000 – a great deposit on a new car or you could pick up a six-year-old Mercedes-Benz C-class with 130 000km on the clock for R124 000.

Roland says with a good and quality model, it will last you another six years.

Buying second-hand
“If you are going to buy a second-hand car, spend time doing your research,” says Roland. Speak to your local mechanic about which cars are the most reliable and cost effective to service.

The mechanic will also tell you what the typical repair issues are with certain models that you need to look out for when inspecting a car. “If you’re buying from a dealer, ask for the contact details of the previous owner and if the dealer is not prepared to give those to you, walk away,” says Roland.

If you are concerned about major repairs, you can buy an extended warranty through your dealership or your bank. The extended warranty will cover you for unexpected repair costs. For locally-made cars, the costs of the warranty are relatively low.

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