Don’t be fooled by an attractive car deal

Before you sign the dotted line, know what conditions are applicable on the deal you get when you buy a car and what risks are assumed by the supplier or by you, the customer.

The Residual-Payment Option

In these hard times the residual-payment option looks very attractive. This is when your monthly payments are lower than normal but you have to pay the bank the balance at the end of the instalment period. In this case you must ensure that the car’s trade-in is worth at least what the settlement is.

For example, if you bought a car for R100 000 and took a 60/40 residual-payment option over four-and-a-half years, you’d still owe R40 000 when the repayment period was up. If a dealer bought the car from you for R60 000 at the end of the repayment period he’d first settle the R40 000 balance with the bank and you’d only be left with R20 000 to buy another car.

The Buy-Back Deal

Another popular offer is the buy-back deal. The buy-back offer is a guarantee from the car manufacturer that it’ll pay an agreed percentage for the used vehicle at the end of the finance term. You’ll have a reduced monthly instalment, as you only pay for the use of the car for the duration of the agreement. A word of caution, though: in many instances the finance house will place restrictions on the kilometres travelled per annum and will penalise excess mileage.

Car Buying Tip:

If the dealer won’t budge on the price, negotiate for free extras such as air conditioning. Remember: the salesman needs your business more than you need his car.