Buying a new car: asset or liability?

FRANCOIS LOTTERY

The dream of buying your own car can quickly turn into a nightmare if you don’t take into account all the necessary calculations.

Top Revs knocked on the doors of Bank Windhoek’s vehicle finance department to find out what to look for and how to make sure owning your own car doesn’t turn into a disaster.

First of all, you have to decide what you need the car for.

“Other factors also need to be considered,” says Sandra Blaauw of Bank Windhoek’s Vehicle & Asset Finance arm.

These include fuel consumption, vehicle safety features and carbon emissions.

First-time buyers are likely to fall into this bottomless pit if they are not aware of the hidden costs when signing this contract.

Costs include insurance premiums, ever-increasing fuel prices, wear and tear (especially when it comes to a used vehicle), services and spare parts.

Most new cars come with a maintenance plan that can even be extended for a cost, making it easier on the budget, but maintenance plans don’t include tire and brake wear.

The age-old question of whether to buy a new or used car depends on what the customer can afford.

“Budget is probably the key word here, and can budget cover a new or used vehicle?” said Blaauw.

If your budget does not allow you to buy a new vehicle, the only option is to consider a used vehicle.

Once you have decided which car to buy and the purpose of purchasing the vehicle, you can speak to your banker, who will help you with the calculations and costs involved.

Most dealerships even go the extra mile to help customers complete the required paperwork and get them to your preferred bank for financing.

Dealerships will inform you of the documents required by a financial institution when buying your car through the bank.

To help with calculations of proposed installments, some dealerships, such as NamAuto, provide a calculator on their website that can give you an indication of the monthly installments payable to your bank.

It even helps you calculate how much you’re entitled to when working on a tight budget, or what a payout would be when a budget really isn’t an issue.

Since buying a vehicle is a medium to long-term decision, careful budget planning, and in most cases with your spouse or partner, is essential.

The entire household budget will be affected as vehicle installments can take up a significant portion of your income.

“At this point, customers should consider the price of the down payment and insurance on the item, as well as the cost of maintaining the vehicle before committing to making the offer to purchase,” says Blaauw.

As mentioned earlier, most new cars and models come with an engine plan, but owners should note that tires and brakes are not covered by the engine plan or vehicle warranty.

Replacing them can significantly increase your vehicle’s expenses if not budgeted well in advance.

But what if you don’t have the cash on hand to pay for tires or brakes?

Blaauw says in such cases it’s best to speak to your personal banker.

When taking your vehicle out of the showroom, always keep in mind that costs such as fuel, driver’s license, insurance, unforeseen breakage or even battery replacement, services and repairs may result in unforeseen expenses.

Don’t buy a car to impress your friends and loved ones.

Instead, buy a vehicle you can afford without compromising your family’s well-being.

What if you can’t afford or pay the installments due to unforeseen circumstances, like losing your job or closing your business?

The best and only advice is to go to your banker and play open cards, says Blaauw.