A car has become more than just a simple mode of transportation, while it still serves its primary purpose of getting you from A-B while sitting comfortably in traffic it has now taken on a variety of new and different meanings. For some their car is a measure of their success, while others its to showcase brand affinity. Some vehicles also envoke a sense of aspiration, and there are many consumers out there who have a car they see as their dream car.
The dream car is by no means one brand, model or make; everyone has their preference which is why it's an item that becomes so endearing to many a motorist. While some may dream of owning the most expensive supercar, others may want to own a luxury vehicle that while pricey is still a goal that is well within reach. If you're in the latter situation and you're looking to either purchase your first dream car or upgrade from your current vehicle to that sweet ride you've always wanted, you'll need to follow a few steps to get there.
Very few of us have large sums of spare cash laying around to purchase a vehicle and will need to go through financial institutions to get funding, which has its requirements and complications. If you're planning to finance your dream car shortly, then we have a few tips that could help assist you in avoiding costly mistakes and getting you in that dream car driver's seat in a financially practical manner.
You can't start to save if you can't keep track of where your money is going, and that's why budgeting is such a key aspect to any significant financial decision. If you don’t already have a budget you should seriously consider putting one together. Create a spreadsheet that categorizes your monthly costs and reviews all expenditure. Once you have an overview of where your money goes you can start removing expenses you that are not essential and defer these costs into a savings account.
When trying to finance a car, there is a range of options available to you in South Africa. Specialized motor financing through one of the big players is the way most people would go.
The trouble with financing is the amount you will need to pay back in interest needs to be taken into account. By saving more cash to buy a car on finance you will reduce the payback period, monthly repayment and of course the interest as you lower your risk. The lesson here is to borrow as little as possible and borrow for as short a period as possible.
The average South African consumer will naturally be faced with unavoidable monthly bills that will need to be serviced., When drafting up our budget from the previous suggestion look at how much you can begin to set aside as savings. Now that you have a savings figure to work with, you can then calculate how long it will take you to build up towards that deposit.
Now that you know how much you're willing to comfortably save, its time to set up a special account for your deposit, this can be a savings account or money market account. Check with your bank and look at the most favorable interest rates they can offer you for saving your money.
Once you decide on an account you can then automate the process and set up a monthly stop order on your chequing account that is paid into a savings account. But be realistic about this. As you continue on with you may even forget about this little nest egg and when you see its growth, you may be tempted to take some out. However, try to resist that urge and put that money aside if you really have your heart set on getting that car you've always wanted.
Since you're most likely going to have to rely on the financing you will need to provide to financial institutes that you are a trustworthy individual who repays their debts, which can be seen via your credit score. Having a no credit score or worse a bad credit score means you are seen as high risk. This means you could encounter high-interest rates, and you could also be limited to a very low price point in terms of available finance.
Getting a credit card is a simple way to raise your credit score. Some credit cards are easy to obtain. However, be cautious about using your card. Don’t use it too frequently or you could build up debt. Another way to raise your credit score is to pay off all of your debts as soon as possible, this can be done personally but in serious cases, you may need to enlist the help of a debt counsellor.
If you're saving and current salary simply won't get you to your deposit you need quick enough, then its time to look at adding additional revenue streams. Consider all of your options for making more money, this could be a raise at work, finding a new job with a more competitive salary, starting a business on the side, selling a few items, renting out products or skills you have on a freelance basis.
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It is important to check the progress of your savings account from time to time. You may find that during your initial budgeting you've found ways to add additional income, reduce further expenses or maybe a bonus payment or two could be added to your current monthly contribution. Also, be sure to review that the savings method you use returns the best interest rate on the money you have put away in order to maximize your returns.
How much deposit should you save up? The short answer is there is no perfect deposit amount, the more you can put down the better it will be for you financially in the long term. A 10 percent deposit would be a minimum, but anything higher would save you lots of money in interest, and also increase your chances of getting finance approved. Once you have kept up a sizeable deposit, do some research on repayment costs, on the amount that you plan to borrow.
Don’t choose a car that is beyond your means; you either will have to wait a little longer or be realistic with your dreams. If you have your heart set on a specific make and model, but you're on a budget, a good option is to check out used-car options. A new car loses the most significant chunk of its residual value in the first two years after the sale, so opting for a good used three-year-old vehicle can be an option.
You will have to be on the prowl because bargains like this don't tend to sit on the market for too long, check online car trading sites or chat to local dealerships that may know how to track down re-sold cars.
I know its tempting to jump at the first opportunity to purchase your dream car, but your enthusiasm might just come at a high cost. When looking at your dream car, the color you want, mileage, etc., you need to do some comparative shopping, check out various websites and dealerships to get a feel for the average pricing in your area. In some cases, you may even find the car of your dreams at a better deal somewhere across the country and bag yourself a considerable saving.
You will also get the opportunity to spend some quality time with your new ride as you break it in on the open road driving it back home.
I know its tough to resist instant gratification but if you try to buy your dream car too soon, you’ll end up with financial stress. If you take on car payments that you can’t afford, it won't be long before the financial burden lands you in debt. If you take on more work than you can handle, you’ll end up stressed and unhappy and even your dream car won't be able to cheer you up.
So make sure that your follow responsible buying habits don't let your dream purchase become a living nightmare.