What to know when buying a new car in 2016

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What to know when buying a new car in 2016

It is no secret that financial times are tough for South Africans, and are set to become even more fraught as the effects of various negative economic factors come into play during 2016.

It is no secret that financial times are tough for South Africans, and are set to become even more fraught as the effects of various negative economic factors come into play during 2016. One of the biggest financial burdens to South Africans is the cost of buying a new vehicle, and for those investigating doing so this year, it’s important to ensure they are fully furnished with the financial facts.

Prioritise price

According to Lizette Erasmus, Head of Insurance Expertise at IntegriSure, the number one consideration when purchasing a car in 2016 will certainly be price, as price-consciousness is more important than ever due to the tight economic conditions in South Africa and across the globe. “It’s also important to bear in mind that this does not include the initial cost of a car, but future costs such as replacement parts or repairs, as well as other associated costs such as insurance and services,” Erasmus explains. “Particularly when purchasing a pre-owned car, which are often older and may require more maintenance than a brand new car, be mindful that the weakening rand and other economic factors has seen a drastic rise in the cost of parts, most especially imported parts. As such, opting for a locally manufacture car can significantly reduce the overall cost of the vehicle.”

Considerations around maintenance also extend beyond that of personal finances. “The importance of keeping a properly maintained and road worthy vehicle as a critical factor in road safety and the wellbeing of yourself, your passengers and your fellow South Africans, should never be underestimated,” Erasmus continues. “Over and above the cost of countless lives lost on South African roads, deputy transport minister, Sindisiwe Chikunga, has been cited describing road accidents costing the South African economy an estimated R306 billion per year, with other sources indicating this could be up to 10% of our GDP.”

Don’t jump without a parachute

Choosing the correct insurance cover is a particularly important issue as the associated costs can become astronomical for an individual should comprehensive insurance cover not be in place. “Unfortunately, many South Africans see insurance as a grudge purchase, as it is an intangible product until the day you submit a claim. This is reflected in the country’s extremely low numbers of insured drivers – currently, fewer than one in three cars on our roads don’t have insurance cover,” says Erasmus. “However, choosing not to take out a comprehensive vehicle cover, or taking out a cheap product which may not cover you fully, can be a dangerous choice for vehicle owners should the need for insurance cover actually arise – such as in the case of an accident of vehicle theft,” she warns. “The popular saying of ‘you wouldn’t jump out of a plane with a cheap parachute’ applies here as well.”

Another key insurance consideration is checking that your insurance provider’s listed book-value of a vehicle – the amount which cover will be specified to – matches the retail value of the car. “This is critically important to ensure that you are able to replace your vehicle to the same value should theft or writing off of the vehicle occur,” Erasmus says. “Considering that in 2015 there were 12 773 of carjacking cases recorded, a 14.2% increase from the previous year, selecting the appropriate cover should be kept top of mind.”

Pre-owned is best

Brand new car sales have plummeted over the years to recent record lows, indicating that the vast majority of financially empowered South Africans are opting to purchase pre-owned vehicles.

“When choosing suppliers for the car purchasing process – such as car dealerships, financial service providers and insurers – make sure to only approach reputable organisations and individuals,” advises Erasmus. “Ensure you research the organisation or individual beforehand, and check that the correct registrations, policies and services are in place through a comparison exercise. Checking customer reviews is also a useful method to identify any repeated issues that may become your problem in the future. Organisations that prioritise client service are always a preferable choice,” she says.

Do your homework

While the prospect of researching and choosing the right vehicle for your needs and financial capability may seem daunting, preparing yourself by conducting thorough research can be a critical tool in preventing any surprises or protecting yourself from unforeseen costs. “Make sure you understand the price range of vehicle you are looking for versus the cost of the model on sale, as well as the book value your financial services provider will cover that make and model for. It is also advisable to research different varieties of car makes and models, and the factors that could affect your insurance premium for them – for example, if a certain make or model is listed as a prime hijacking target,” Erasmus says.

Another key research focus should be the benefits and add-on products offered by various players in the car-buying process, such as car manufacturers and insurance providers. “These benefits – such as top up cover, car tracking devices, road-side assistance, car hire, take-me-home products, 24-hour customer services etc. – can add a great amount of value to the vehicle owner. Take a practical approach when comparing benefit offerings, and identify which would potentially be the most useful to you, based on your own needs and circumstances.”

Erasmus concludes by explaining that buying a new car can be exciting and liberating, but does not have to be a gamble. “If in doubt during this process, make sure to ask the advice of your insurance provider or a trusted advisor with the necessary knowledge.”

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