How to choose an appropriate vehicle finance plan

Brian Joss – The annual Festival of Motoring takes place from August 22 to 25 at Kyalami Grand Prix Circuit. Promising to be an all-round, exhilarating experience for the whole family, it is also a place where consumers who are in the market to buy a car are sure to experience it there.

If consumers happen to find their dream car, WesBank, a sponsor of the festival, is available to assist through its Online Application with finance and help navigate the car buying journey with ease.

It is advisable to understand the various finance options available to consumers prior to making that buying decision. Often, as a result of elevated excitement, consumers don’t ask enough informed questions during the purchasing process.

Here, WesBank provides an outline of the options to help consumers select a plan that suits their affordability.

Guaranteed future value (GFV), otherwise known as GFV, has become an increasingly popular form of vehicle finance amongst South African consumers. This finance option appeals to the customer who is interested in ‘usership’ of the vehicle versus full ownership.

A GFV plan calculates the future monetary value of a vehicle, provided the vehicle condition, mileage and maintenance agreements are adhered to. This guaranteed future value helps consumers know exactly what their car will be worth once the pre-determined contract term, which is usually between three and four years, is reached. At the end of the pre-determined contract term, the customer can either enter into another GFV deal and drive away in a new vehicle, settle the outstanding amount and own the vehicle, or simply return the vehicle to the respective dealership and walk away, provided the driver didn’t exceed the prearranged mileage and the vehicle is in an acceptable condition according to the agreed terms.

Instalment finance is the most straightforward of all available vehicle finance options. Monthly repayments are calculated on the purchase price of a vehicle, minus whatever deposit is put down at the commencement of the deal. Finance terms can be structured into time frames of between 12 and 72 months. The longer the term, the lower the monthly repayment will be.

However, interest will add up over longer terms and the total amount repaid to the bank will increase proportionally.

Instalment finance with a balloon payment option is similar to instalment finance, except a portion of the purchase price is set aside so that the repayments are calculated on a lower amount. Simply put, a balloon payment is similar to a deposit, except it’s payable at the end of a term instead of at the beginning. Consumers must be cautious and aware of the amount put into a balloon because they will be responsible for the lump sum at the end of the term agreement. While it may be attractive to have lower monthly repayments because a larger chunk of the purchase price is placed into a balloon, the repayment of a balloon can be an inconvenient debt as this amount will either need to be settled or refinanced at the end of the deal.

WesBank Head of Motor, Ghana Msibi, says, “We offer finance calculators to help consumers select a financial plan best suited for their needs. Our digital platforms offer easy access to our handy Purchase Price Calculator that helps determine the loan amount your budget will support. While our Vehicle Finance Calculator can help work out monthly repayments based on term length, deposit, balloon amount and interest rate. So, whether you are exploring finance options on a specific vehicle, perhaps your first car, a vehicle at a dealer or from a private individual, or even a car on auction, WesBank can help you get a personalised view of what you can realistically afford,” concludes Msibi.

CAPTION: Find the right finance plan. Picture: Motorpress

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