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The Ultimate Guide to Car Finance: Understanding the Best Car Finance Options

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Are you a driver looking for the best car finance options? Look no further! In this guide, we will explain all the details of car finance, enabling you to make informed decisions that suit your requirements.

understanding-the-best-car-finance-options

Whether you are a first-time buyer, looking for a new car, or considering an upgrade, understanding the different car finance options is essential. From personal loans to hire purchase agreements and car leasing, we will explore the pros and cons of each option, giving you a clear understanding of what will work best for you.

Our team of experts has researched the market extensively, ensuring that the information provided is up-to-date and accurate. We will guide you through the application process, explain the necessary paperwork, and discuss the factors that lenders consider when assessing your eligibility.

So, buckle up and join us on this journey as we demystify car finance and empower you to make the best decision for your financial future.

Understanding Car Finance Options

When it comes to financing a car, there are several options available to drivers. Each option has its advantages and considerations, so it’s important to understand the differences before making a decision. One popular car finance option is a hire purchase agreement. With a hire purchase, you pay a deposit upfront and then make fixed monthly payments over a set period. Once all payments are made, you become the owner of the car. This option provides flexibility in terms of repayment period and allows you to spread the cost over time.

Another option to consider is a personal contract purchase (PCP). With a PCP, you make lower monthly payments compared to a hire purchase, as you are essentially leasing the car. At the end of the agreement, you have the option to either return the car or make a final balloon payment to own it outright. PCPs are popular for those who like to upgrade their car frequently.

If you prefer to own the car outright from the start, a personal loan may be a suitable option. With a personal loan, you borrow a lump sum from a bank or lender to purchase the car, and then repay the loan over a fixed term. This option allows you to own the car immediately and gives you more flexibility in terms of car choice and ownership.

Lastly, car leasing offers a different approach to car finance. With a lease, you essentially rent the car for a fixed period, usually 2-4 years, and make monthly payments. At the end of the lease, you return the car without any ownership responsibilities. This option is popular for those who prefer lower monthly payments and don’t want to worry about depreciation or selling the car.

Advantages of Car Finance

Car finance offers several advantages for drivers. One of the main benefits is the ability to spread the cost of purchasing a car over time. Instead of paying a large lump sum upfront, car finance options allow you to make monthly payments, making it more manageable for your budget.

Another advantage is the flexibility that car finance provides. Depending on the option you choose, you can tailor the repayment period to suit your needs. Whether you prefer a shorter repayment term or a longer one, car finance options offer flexibility in terms of how long you want to make payments. Car finance also allows you to drive a better car than you may be able to afford outright. By spreading the cost over time, you can choose a higher-spec model or a car with additional features that you may not have been able to purchase otherwise.

Furthermore, car finance options often come with fixed interest rates, providing stability and predictability in your monthly payments. This allows you to plan your budget more effectively and avoid any surprises.

Types of Car Finance – Hire Purchase, Personal Contract Purchase, Personal Loan, and Leasing

Understanding the different types of car finance options is essential to make an informed decision. Let’s take a closer look at each option and explore their advantages and considerations.

Hire Purchase

Hire purchase is a popular and convenient car finance option. With a hire purchase agreement, you pay an initial deposit, typically around 10% of the car’s value, and then make fixed monthly payments over an agreed-upon term, usually 1-5 years. Once all payments are made, you become the owner of the car.

One of the advantages of hire purchase is the flexibility it provides in terms of repayment period. You can choose a shorter term to pay off the car quickly or opt for a longer term to spread the cost over a more extended period. The monthly payments are fixed, making budgeting easier.

However, it’s important to consider that with a hire purchase, you do not own the car until the final payment is made. If you default on the payments, your lender has the right to repossess the vehicle. Additionally, the interest rates for hire purchase agreements may be higher compared to other options.

Personal Contract Purchase

A personal contract purchase (PCP) is another popular option for car finance. With a PCP, you essentially lease the car for a fixed term, typically 2-4 years, and make monthly payments. At the end of the agreement, you can either return the car or make a final balloon payment to own it outright.

One of the advantages of PCPs is the lower monthly payments compared to hire purchase agreements. This option allows you to drive a more expensive car for a lower monthly cost. Additionally, PCPs offer flexibility at the end of the agreement, with an option to upgrade to a new vehicle or purchase the current one.

It’s important to consider that with a PCP, you do not own the car until the final balloon payment is made. If you decide not to make the final payment, you will need to return the car. Additionally, there are mileage restrictions and wear-and-tear guidelines that you must adhere to during the lease period.

Personal Loan

A personal loan is a straightforward option for car finance. With a personal loan, you borrow a lump sum from a bank or lender to purchase the car and then repay the loan over a fixed term with interest. This option allows you to own the car outright from the start.

One of the advantages of a personal loan is the immediate ownership of the car. You can choose any car within your budget and do not have any mileage restrictions or wear-and-tear guidelines to worry about.

Additionally, personal loans often come with fixed interest rates, providing stability and predictability in your monthly payments. This allows you to plan your budget more effectively and avoid any surprises.

However, it’s important to consider that with a personal loan, you are responsible for the car’s depreciation. If you decide to sell the car in the future, you will need to handle the process yourself.

Leasing

Car leasing offers a different approach to car finance. With a lease, you rent the car for a fixed period, usually 2-4 years, and make monthly payments. At the end of the lease, you return it without any ownership responsibilities.

One of the advantages of leasing is the lower monthly payments compared to other options. Leasing allows you to drive a new car for a fixed period without the commitment of ownership. Additionally, you don’t have to worry about the depreciation of the car or the hassle of selling it in the future.

However, it’s important to consider that with leasing, you do not own the car at any point. You are essentially renting the car for the agreed-upon period. Additionally, there are mileage restrictions and wear-and-tear guidelines that you must adhere to during the lease period.

Factors to Consider When Choosing Car Finance

When choosing car finance, several factors need to be considered to ensure you make the best decision for your financial situation. Here are some key factors to keep in mind:

Budget

Before considering any car finance options, it’s essential to determine your budget. Evaluate your monthly income and expenses to understand how much you can comfortably afford to spend on car finance payments. Remember to consider additional costs such as insurance, fuel, and maintenance.

Repayment Period

Consider how long you want to make payments for your car finance. Longer repayment periods may result in lower monthly payments, but you will end up paying more interest over time. Shorter repayment periods may have higher monthly payments but allow you to pay off the car quicker and potentially save on interest.

Ownership Preferences

Decide whether owning the car outright is important to you or if you are comfortable with leasing or having the option to return the car at the end of the agreement. Ownership preferences can help narrow down your car finance options.

Mileage Restrictions

If you choose a lease or PCP option, consider the mileage restrictions. Some agreements have mileage limitations, and exceeding them can result in additional charges. Evaluate your driving habits and ensure that the agreed-upon mileage aligns with your needs.

Wear-and-Tear Guidelines

Similar to mileage restrictions, leasing and PCP agreements often have wear-and-tear guidelines. Evaluate these guidelines and consider whether they align with your lifestyle. If you tend to put more wear on your vehicles, it may be better to consider options without stringent wear-and-tear guidelines.

Taking these factors into account will help you make an informed decision when choosing car finance. By considering your budget, repayment period, ownership preferences, mileage restrictions, and wear-and-tear guidelines, you can find the option that best suits your needs.

Applying for Car Finance – Eligibility Criteria and Documents Required

Now that you have a good understanding of the different car finance options and factors to consider, let’s dive into the application process. Applying for car finance requires meeting certain eligibility criteria and providing the necessary documents. Here’s what you need to know:

Eligibility Criteria

The eligibility criteria for car finance can vary depending on the lender and the type of finance option you choose. However, some common requirements include:

  • Age: You must be at least 18 years old to apply for car finance.
  • Residency: You must be a South African resident with a South African address.
  • Employment: Lenders often require applicants to have a stable source of income, whether as an employee or self-employed.
  • Credit History: Your credit history is crucial in the approval process. Lenders will assess your credit score and credit history to determine your creditworthiness.

Make sure you review the specific eligibility criteria for the finance option you are interested in to ensure you meet all the requirements.

Documents Required

When applying for car finance, you need certain documents to support your application. While the specific requirements may vary depending on the lender, here are some common documents you may need:

  • Proof of Identity: A valid driving license or passport.
  • Proof of Address: Utility bills or bank statements showing your current address.
  • Proof of Income: Payslips, bank statements, or tax returns to demonstrate your income.
  • Bank Details: You will need to provide your bank account details for the direct debit payments.

It’s important to gather all the necessary documents before applying for car finance to ensure a smooth application process. Check with the lender or finance provider for their specific document requirements.

Car Finance Interest Rates and Fees

Interest rates and fees are important considerations when choosing car finance options. Understanding these costs will help you compare different options and choose the most affordable and suitable one for your financial situation.

Interest Rates

Interest rates for car finance can vary depending on several factors, including the finance option, the lender, and your creditworthiness. Typically, interest rates for car finance options such as hire purchase, personal contract purchase, and personal loans are fixed for the duration of the agreement.

To secure the best interest rates, it’s essential to have a good credit score and history. Lenders are more likely to offer lower interest rates to borrowers with a strong credit profile. Additionally, shopping around and comparing offers from different lenders can help you find competitive interest rates.

Fees

In addition to interest rates, car finance options may come with certain fees. Some common fees to be aware of include:

  • Arrangement Fee: This fee covers the administrative costs of setting up the finance agreement.
  • Early Repayment Fee: If you decide to pay off the finance agreement early, you may be charged an early repayment fee.
  • Excess Mileage Fee: If you exceed the agreed-upon mileage restrictions in lease or PCP agreements, you may be charged an excess mileage fee.
  • Wear-and-Tear Fee: Similar to excess mileage fees, if you do not adhere to the wear-and-tear guidelines in lease or PCP agreements, you may be charged a wear-and-tear fee.

It’s important to review the terms and conditions of the finance agreement and understand any potential fees before signing the contract. This will help you avoid any surprises down the line.

Car Finance for Different Types of Drivers – New Drivers, Self-employed Individuals, and Those with Bad Credit

Car finance options are available for different types of drivers, including new drivers, self-employed individuals, and those with bad credit. Let’s explore the specific considerations and options for each group:

New Drivers

As a new driver, you may face some challenges when applying for car finance. Lenders often consider new drivers a higher risk due to their limited driving experience. However, there are still options available:

  • Guarantor Loans: A guarantor loan involves having a family member or close friend co-sign the finance agreement. If you default on payments, the guarantor becomes responsible for them. Having a guarantor can increase your chances of approval and potentially secure more favourable terms.
  • Higher Deposit: Offering a higher deposit upfront can help mitigate some of the risks associated with new drivers. A larger deposit shows the lender that you are committed to the agreement and reduces the loan amount.

It’s important to compare offers from different lenders and consider the specific requirements for new drivers. Building a good credit history and improving your driving experience over time will also increase your chances of securing more favourable car finance options in the future.

Self-employed Individuals

Self-employed individuals may face additional challenges when applying for car finance. Lenders often require proof of stable income, which can be more challenging for self-employed individuals. However, there are options available:

  • Bank Statements: Providing bank statements that show a consistent income stream can help demonstrate your ability to make repayments.
  • Accounts and Tax Returns: Self-employed individuals can provide accounts or tax returns to showcase their financial stability and income.

It’s important to gather all the necessary documents to demonstrate your income and financial stability as a self-employed individual. Working with lenders who specialise in car finance for self-employed individuals can also increase your chances of approval.

Those with Bad Credit

Having bad credit doesn’t necessarily mean you can’t secure car finance. There are options available for those with bad credit, although they may come with higher interest rates:

  • Specialist Lenders: Some lenders specialise in providing car finance options for individuals with bad credit. These lenders consider other factors, such as your employment history, income, and ability to make repayments.
  • Guarantor Loans: Similar to new drivers, having a guarantor can increase your chances of approval and potentially secure more favourable terms.

It’s important to be realistic about your options and compare offers from different lenders. Working on improving your credit score over time can also increase your chances of securing more favourable car finance options in the future.

Car Finance Calculators and Tools

When considering car finance options, it can be helpful to use car finance calculators and tools to estimate costs and compare different options. These tools provide an easy way to assess affordability and understand the financial implications of each option.

Car finance calculators typically require you to input details such as the car’s price, deposit amount, repayment period, and interest rate. The calculator then provides you with an estimate of the monthly payment, total interest paid, and the total cost of finance.

By using these calculators, you can experiment with different scenarios and find the option that best suits your budget and financial goals.

Wrappin it Up

Choosing the right car finance option is crucial for drivers. Whether you are a first-time buyer, looking for a new car, or considering an upgrade, understanding the different options and factors to consider will empower you to make an informed decision.

We have explored the advantages and considerations of different car finance options, including hire purchase, personal contract purchase, personal loans, and leasing. We have also discussed the factors to consider when choosing car finance, the application process, interest rates and fees, and specific considerations for different types of drivers.

By utilising car finance calculators and tools, you can estimate costs and compare different options to find the most suitable one for your financial situation. Remember to review the terms and conditions, eligibility criteria, and document requirements of each option before making a final decision.

With this ultimate guide to car finance, you are now equipped with the knowledge to navigate the car finance landscape confidently. So, buckle up and drive towards a brighter financial future.

All-New second-generation Honda BR-V takes on an undeniable SUV identity

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BR-V

Attractive and bold new styling

High-quality interior with practical and versatile configuration

Full suite of advanced safety features

Updated chassis, suspension and body rigidity

Honda Motor Southern Africa is solidifying its presence in the growing 7-seater SUV market in South Africa with the introduction of the All-New second-generation of the BR-V. Compared to its predecessor, the new model represents a significant improvement in exterior design, standard features, technology and increased interior space.

Offering attractive new styling, a practical and versatile cabin, good performance and handling, and an extensive list of standard features. The All-New Honda BR-V combines the characteristics of an SUV with the space and utility offered by an MPV. The range offers three specification levels, one engine option and a choice between manual or CVT (model dependent).

Looking the part

Introduced locally in 2016, the first-generation BR-V represented true value by offering customers utility, space and comfort at a competitive price. However, where its styling displayed decidedly MPV-like characteristics, the All-New BR-V looks the part of a true SUV. While remaining graceful and elegant, it imparts a sense of toughness, with a body that is 35mm longer and 45mm wider offering generous amounts of space for occupants in all three rows.

It boasts a dynamic body shape, with strong contour lines that run from the front to the rear and accentuate its overall length. The All-New BR-V also has a completely redesigned front end that accentuates its rugged new appearance, with the most prominent features being an aggressive and sporty new grille and newly designed LED daytime running lights and headlamps. The rear end also sports a LED rear taillight cluster which neatly blends in with the body lines.

Roof rails and alloy wheels (16-inch on Trend and Comfort models and 17-inch on the Elegance) round off the All-New BR-V’s rugged new look. The colour line-up for the range includes Opal White (Pearl), Modern Steel (Metallic), Lunar Silver (Metallic), and Crystal Black (Pearl).

Comfortable by design

The interior of the All-New BR-V is uncluttered and the use of quality materials and finishes throughout the cabin underlines its minimalistic yet stylish appeal. The fascia showcases Honda’s latest design philosophy which is being rolled out across all its latest models. Fabric seats are standard on all but the Elegance model, which – in keeping with its range-topping status – features synthetic leather upholstery and additional trim finishes to differentiate it from the other models in the range.

The redesign of the interior also sees leather-like materials being added to more areas of the cabin – including the armrests, door panels, and dashboard – to create a more upmarket, high-quality feel.

The overall increase in exterior dimensions of the All-New BR-V has greatly enhanced leg and shoulder room for second and third-row passengers. The rearmost seats have a 50/50 split and the second row a 60/40 split, allowing for a variety of practical seating and cargo configurations. With all seats in position, seven occupants can be seated comfortably, while still providing a very usable amount of luggage space. The third-row seats can be folded down if more luggage-carrying capacity is required, while flexibility to transport large and bulky items is provided through the ability to also fold down the second row of seats.

Occupant comfort is bolstered by the addition of power outlets in all three rows (Elegance derivative) to facilitate the charging of smart devices. There is also air-conditioning for rear-seat passengers. The driver has a seat that is adjustable for height, and also benefits from a 4.2” TFT display on the dashboard which provides information on features such as active Honda SENSING functions. The latter (offered on the Elegance model only) is adjustable via controls on the tilt-adjustable steering wheel.

The infotainment has also been upgraded for the second-generation BR-V. Fitted as standard on all models is a brand-new 7-inch touchscreen system with integrated Apple CarPlay and Android Auto connectivity. Comfort and Elegance models gain an integrated reverse parking camera for added convenience.

Pleasing performance all round

The chassis system and body of the All-New BR-V have also been re-engineered, with significant enhancements to the suspension, braking, steering and body construction resulting in improved handling and stability.

The ratio of higher tensile strength steel used on the new model has increased by 24 per cent, resulting in reduced weight, improved safety performance and greater body rigidity. Significant improvements have also been made to the NVH performance to minimise the intrusion of both engine and road noise. This has been achieved through changes to the engine mountings and engine head cover, as well as optimisation of the overall soundproofing through increased application of insulation material to the body structure.

In terms of the powertrain, the All-New BR-V features Honda’s latest 1.5L DOHC i-VTEC engine with a maximum power output of 89kW at 6 600 r/min and peak torque of 145Nm at 4 300 r/min.

The Trend model is only available with a six-speed manual gearbox, while the Comfort has the option of either a six-speed manual or a CVT, which has been specifically tuned for the BR-V. The Elegance is available exclusively with the CVT.

With a fuel tank capacity of 42 litres, models with manual transmission (Trend and Comfort) use 6.8 litres/100km in a combined cycle, while CVT models (Comfort and Elegance) return consumption figures of 6.3 litres/100 km.

Impeccable safety credentials

The All-New BR-V features Honda’s premium suite of active safety features, collectively known as Honda SENSING. As with all Honda models, the BR-V has also been designed using Honda’s proprietary Advanced Compatibility Engineering (ACE) body structure technology.

The enhanced Honda SENSING suite of technologies, which is only available on the Elegance, includes:

Collision Mitigation Braking System (CMBS)

Adaptive Cruise Control (ACC)

Lane Keeping Assist System (LKAS)

Road Departure Mitigation (RDM)

Auto High-Beam (AHB)

Lane Watch Camera (LWC)

Forward Collision Warning (FCW)

The entire BR-V range now also features Vehicle Stability Assist (VSA), Hill Start Assist (HSA), Emergency Stop Signal (ESS), Antilock Braking System (ABS) and ISOFIX child seat anchors. Dual front and side airbags are standard across the range, with the Comfort and Elegance models gaining curtain airbags as well.

The All-New BR-V is available in three specification levels and offers an extensive list of comfort, convenience and safety features across all derivatives. It offers a 1 498cc DOHC i-VTEC engine, mated to either a six-speed manual transmission or CVT gearbox.

All-New Honda Civic RS 2023 CAR OF THE YEAR FINALIST

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Honda Motor Southern Africa is proud to announce that the All-New Civic RS is a finalist in the 2023 South African Car of the Year (COTY) competition, sponsored by Old Mutual Insure.

The 2023 South African Car of the Year (COTY) competition, sponsored by Old Mutual Insure and presented by the South African Guild of Mobility Journalists (SAGMJ), is gearing up to crown the country’s ultimate vehicle champion. With a long-standing history dating back to 1986, this significant event showcases the pinnacle of innovation and excellence in the automotive industry.

The All-New Honda Civic RS combines heritage and technology in an attractive, well-rounded, and modern package and boasts a heritage that spans five decades making it Honda’s longest-running nameplate.

The All-New Civic is packed to the brim with advanced features while keeping true to the Civic DNA styling, handling, and powerful performance. Engineered and powered by passion, inspired by a strong legacy, and built for the future, it makes perfect sense why the Civic would receive a nomination in this prestigious competition.

Winners will be announced at a gala event in June 2023.

Honda Road Trip #TheHondaExperience

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What better way to get ready for the year ahead than to spend a few days out experiencing Honda’s BR-V, FIT, HR-V and of course the Honda Civic which has recently been nominated as a semi-finalist in the Car of the Year 2023 competition.

We couldn’t experience this all alone, so we assembled a whole mixed bag of motoring journalists, to lifestyle and travel influencers to embark on this road trip with us. These individuals actually make a living from living and breathing memorable experiences.

The Honda road trip kicked off from Honda SA’s head office in Waterfall, Johannesburg. The first leg of the trip took our guests to the Lion Safari Park in Hartebeespoort where our guests put the All-New 7 seater BR-V to the test on some less-ideal roads. The BR-V showcased its dynamic off-road capabilities and proved that this 7-seater should definitely be a part of the family as it delivers space, comfort and impressive drive quality.

After a long day on the road, our guests retired for the night at Rosemary Hill. Nestled within a vast farm plot in Pretoria, Rosemary Hills offers a beautiful estate where guests can reconnect with nature, experience farm life, eat fresh organic food, explore the trails and find space to breathe.

But as much as we will be having fun and enjoying the Honda’s and our beautiful province, we of course ride with a purpose so we brimmed the cars with a bunch of essentials goods and visited New BeginningZ (NBZ) a haven for young children where we donated these items to this charity which is doing amazing work with our youth.

The purpose of the Honda road trip was to not only embark on memorable experiences but to also play our part and give back to the community and assist those in need.