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How to qualify for your dream luxury car

This article will give you all the tips you need to ensure that you can afford your luxury vehicle

So, you’ve been driving a car for a while now, maybe even years. But it isn’t your dream car. You find yourself eying a Jeep Wrangler or a sleek BMW convertible; however, when you see the price tag, you’re sceptical of whether you can afford it or if it will always be a dream car. Well, it may be true that owning your dream car isn’t simple. It needs proper planning to ensure that your dream vehicle never becomes a burden that you’ll have to sell or downgrade. Instead, you want it to be a vehicle you enjoy driving for many years.

This article will give you all the tips you need to ensure that you can afford your luxury vehicle. We’ll cover everything from the financial aspect to planning and ensuring that you are still doing what is best for you.

Look into your finance

Before you go to a lender and seek financing, you must look into your finances. Ask yourself the following questions:

  • How much am I able to spend from my salary to pay for the monthly payments?
  • Will I be able to cover the cost of insurance on a luxury car?
  • Am I permanently employed, and is it stable?
  • What is the purpose of the vehicle, and will it fit into my daily life?
  • How long am I planning to keep the vehicle?
  • Is the vehicle from a reliable and safe brand?

Once you have answered this and have a solution, you’ll know that this expense will bring you joy, and be the right financial decision for you at this time. However, if you have other pressing obligations such as a child starting school, welcoming a new baby or starting a new business or job, now may not be the right time to add the expense of a dream car to the list.

Have an impressive credit score

When you’re trying to purchase your dream car, you need to ensure you have an impressive credit score. While the minimum salary to qualify for car finance in South Africa is essential, so is your credit score. Your credit score can change the outcome of your car finance application as it shows lenders what type of borrower you are and whether they can trust you with the amount you need. Your credit score can also help you get a better interest rate or negotiate a payment arrangement suitable for you and your needs. If your credit score isn’t where you want it to be or feel like it needs a little work, take a moment to look at it. Take note and see if there is any incorrect information, missed payments, and if there aren’t any credit card balances you can settle before applying for funding. This will improve your chances of qualifying for your dream car.

Have a deposit ready

Depending on the amount you will be taking out as a loan, a deposit can help you in many ways. For example, it can help lower either your monthly payments, lower your interest rate or even help you meet the requirements for vehicle finance of your luxury car. You have to understand that the amount of money you are seeking may make you a high-risk borrower. So, having a great credit rating that proves that you can stick to your monthly instalments and a deposit ready can help you qualify for vehicle finance of your choice. Once you know the cost of the car you are interested in, you can use a registered credit provider’s vehicle finance calculator to determine how much you need to save up and how that will save you money in the long run or cut the cost of interest.

Your credit history matters

While having an impressive credit score helps, your payment history also matters. This is not to say you must have zero balances on all your credit cards and store accounts, but it is beneficial for you to have a clean record showing you are a reliable payer and stick to the arrangement each month. It is also important because it will help prove that you have a credit mix and indicate you are an eligible candidate for a loan of this size. A credit mix refers to the different accounts you have that contribute to your credit report and credit score. This includes loans and other forms of credit such as store accounts, student loans, personal loans, car loans, home loans and credit cards. This works in your favour as it will indicate to a lender that you have used different types of credit and managed all of them. Thus, in turn, you qualify for your dream car and invoke trust between you and the lender.

Factor in the interest rate

Car finance options in South Africa have loan terms. Most are up to 96 months, which may be expected of you when you take out a large amount of money. You must understand that you will be paying a large amount of money back to the lender. Be sure that you are okay with this and can pay off the money, including the interest rate, for several years. Many lenders have budgeting tools on their app that give you a guideline of the monthly expense of owning the car and how much interest you will be paying overall. This will give you an idea of whether you are in the position to get this car loan or if it is too costly for you. If you want to cut down on interest, be sure to have a large sum of money for the deposit and consider a balloon payment. A balloon payment will have two loan terms. The initial one and one after you finish your last instalment. This allows you to pay lower interest and monthly instalments on your first loan as it will be smaller than the original amount you need. Once you are done with that loan, you start a new loan agreement and pay off that portion. The benefit of a balloon payment is that you can refinance it later and enter a new agreement to pay off the balloon payment. Alternatively, you will settle the balloon payment once-off at the end of your term. Lastly, you can trade-in your vehicle and use that money to pay off the remaining amount. The last option can be beneficial if you plan on changing your car in the future. 

Final thoughts

Getting the car of your dreams is possible. There are financial options that make it easier for you to achieve your dreams. The only thing you need to do is have a plan for it and ensure that you are in the right place financially to afford the monthly repayments as well as additional costs such as car insurance, petrol, repair and maintenance. So, take a moment to look at your finances and these tips and see if you can finally live out your dreams.

 

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