Cape Town - It’s only natural to doggedly pursue your dream car but the first step to buying any vehicle is planning your budget.
Before you drive away from the showroom floor in a luxury vehicle and potentially commit yourself to a large loan, first consider steering yourself through the alternative routes of buying a car.
It is advisable that plotting out a budget with enough unforeseen expenditure ensures that those buying a car are better financially equipped and prepared for unpredictable rise in costs and emergencies.
Plot a budget
Don’t let the terms monthly installments, insurance plans and linked or fixed interest rates intimidate you when plotting out your budget.
1 Let your disposable income figure do the driving. After all other monthly expenses, calculate how much you can realistically afford to spend on monthly car repayments, fuel and insurance. Calculate your monthly disposable figure with Autotrader affordability calculator.
2 An affordable vehicle finance contract. Calculating your monthly disposable figure makes it easier to structure an affordable vehicle finance contract. You can choose either a long or short term period to repay your car loan. A shorter term means paying less interest and getting out of debt sooner. If you want to afford a more expensive car, you can extend the contract to 60 or 72 months of repayment.
3 Minimise the amount of interest. Opting for a short term car repayment is best advised to minimise the amount of interest repaid. The interest rate is expected to rise over the next few years, increasing how much you’re expected to pay for monthly installments if you’ve opted to link interest rates to your finance contract.
4 Leave room in your budget for unforeseen expenditure such as fluctuating fuel prices, rise in interest rates and damage and repair such as replacing a tyre and other damages such as reversing your car into the wall.
5 There are many variables. Monthly installments, insurance costs and fuel are not guaranteed to remain the same throughout your finance contract because of the unpredictable rate of inflation.