To buy or not to buy a car?

2012-02-11 10:29

When you buy a car, it is tempting to opt for the most expensive one you can afford. Car dealerships will always offer all kinds of payment options to maximise how much you can afford to pay.

You may see an advert to own a car for “only R1 999 per month”, but when you read the fine print the payment period is more than 72 months and there is a residual or balloon payment to be made at the end of the financing period.

The longer you take to pay-off your car, the more you are paying and a residual payment can have you paying for your car a lot longer than you expected. The only car you can truly afford is one that you can pay off in 60 months (five years) with no residual (balloon payment).

If you have to extend your payment period or opt for a balloon payment to afford the car, then go for a cheaper model.

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