WATCH: SA car 'ponzi' scam - How a dealership sold luxury cars to motorists who could never afford them
A new car is a great step towards financial independence and many South African motorists are eager to find a great deal on a new set of wheels. When it comes to buying a new car, the two most important words in your vocabulary should be "patience" and "preparation".
Unfortunately, their are unscrupulous dealers ready to take advantage of potential car owners desperate for a seemingly good deal as Carte Blanche uncovered in South Africa just last week. We've included tips on purchasing a new vehicle in SA at the end of this article.
According to the show: "Carte Blanche investigates how one high-end car dealer had hundreds of people fooled with a bogus cash-back dealer-assist investment scheme linked to a non-existent oil company in Dubai."
Watch the video below:
Buying a car in SA
What are the most obvious pitfalls to navigate through for prospective tyre kickers?
1. Lack of research
It's 2018, not 1995, so there’s no excuse not to access a wealth of online reviews, statistics and forums before setting foot in a dealership.
The internet is what car sales people fear the most, because car shoppers are becoming ever-more informed thanks to Google. You should also check a vehicle’s history at the dealer against its VIN number.
2. Buying the first example you see
Given the host of car-buying platforms in SA, there will be several examples of the same car you are interested in elsewhere, or if you are buying used – with lower mileage, in better condition or selling for less. Take your time; haste makes waste.
3. Skimping on the test drive
This often goes hand-in-hand with the above point – just because you’ve fallen in love with the car you’ve been eyeing at the dealership, doesn’t mean it’s perfect, mechanically sound or even joyful to drive. This is all the more important when buying a used vehicle.
4. Buying the wrong car for your needs
Do you really need a 4x4 SUV if you never go off-road? A convertible roadster is a great car for a Sunday morning blast, but not very useful if you have to ferry kids to school or are into mountain biking. Similarly, two-door cars look cool, but are disastrous for families, for obvious reasons such as practicality. Buy what you need, not what you like.
In the same way that lust is now and love is forever, buying a car should be a rational decision rather than an emotional one. A rational buyer takes into account future challenges, while an emotional one only considers the present – which almost always leads to his or her remorse further down the line.
Would you like a GTI badge on the back of your Golf? Of course. But do you really need one when a 1.4 TSI will suffice, along with the added monthly responsibilities like a bond, school fees and DSTV if you are already stretched for affordability?
6. Ignoring associated costs
Yes, you nearly broke the bank in getting that German SUV in your driveway, but your woes have not even begun. Have you considered how much fuel, tyres and servicing costs – particularly when buying used and without a maintenance plan?
Your monthly premium is not the only factor to consider when buying a vehicle, and is not the total figure you should be budgeting monthly.
7. Trading in your old car instead of selling it privately
The smell of a new car can be irresistible to some, triggering impulsive actions such as immediately wanting to trade in your old car as a deposit before driving off with a new one.
Admittedly trading a car in is more convenient than selling it by the roadside with a tear-off sticker on the window, but just remember, the dealer still needs to make a profit on your trade-in when he sells it to the next buyer. The lesson? You’ll make more money by selling it yourself.
8. Only focusing on the instalment
That Volkswagen Golf GTI you're searching for can cost only R5000 per month, so yes, you could afford it. Beware though as you’ll end up paying it off over 72 months (six long years) and on top of that, be required to pay a residual amount (up to 35% of the vehicle’s new value) that you might not be able to afford.
Since you might struggle to afford the instalments, there’s no way you can afford the balloon payment unless you refinance it, meaning you could conceivably pay off your car for 10 years. By which time it will be worth nothing, you would have wasted thousands of Rands in interest, and you would have come to hate it, and not to mention yourself – for making such a poor decision.
9. Buying new when used will do
A car loses anything between 15 and 20% of its value during its first year. You can save big when buying a year-old model that still has the remainder of a factory warranty, and service or maintenance plan in place for peace-of-mind, peace-of-wallet motoring.
10. Not being prepared to walk away
Remember, the dealer is more desperate to sell the car than you are to buy it. Your willingness to walk away (and showing it) strengthens your hand when it comes to haggling over the price and those annoying and useless extras, which you must always do – yes, you can always negotiate a discount when buying new.