All options to finance your car

Buying a car involves more than choosing a monthly payment. From conventional vehicle finance and personal loans to prepaid subscriptions such as DrivePass, understanding your options will help you choose an arrangement that suits your budget and circumstances.

Start with two questions: do you want to own the car, or do you mainly need access to reliable transport? And what can you comfortably afford in terms of ownership or finance once insurance, fuel and maintenance are included?

Instalment sale agreements: conventional vehicle finance

With an instalment sale agreement, a finance provider pays the seller and you repay the amount borrowed, plus interest and fees, over an agreed period.

Your monthly instalment depends on the vehicle price, deposit, interest rate, repayment term and any balloon payment.

A longer term generally reduces the monthly repayment but increases the interest paid overall. Compare the total cost of credit as well as the instalment before deciding.

Approval depends on the lender’s assessment of your credit profile and affordability.

Putting down a deposit

A deposit reduces the amount you need to borrow. This can lower your monthly instalment and the total interest payable.

A trade-in can also contribute towards the deposit, provided its value exceeds any outstanding finance that needs to be settled.

Keep sufficient money available for other expenses rather than putting all your savings into the purchase.

Balloon payments

A balloon payment postpones part of the amount owed until the end of the finance term. This lowers your monthly instalments, but the final amount still needs to be paid.

For example, a balloon of R60 000 means that amount remains payable after the scheduled monthly repayments.

You might settle it using savings, refinance it if approved, or sell or trade in the vehicle. However, refinancing is not guaranteed, and the vehicle’s value may not cover the outstanding balance.

A balloon can make the monthly payment look more affordable while increasing the interest paid overall. Plan for the final payment from the start.

Fixed or variable interest rates

A fixed interest rate stays unchanged for the agreed term, giving you greater certainty about repayments.

A variable or linked interest rate moves with the reference rate specified in your agreement, typically prime. Your instalment can therefore rise or fall.

Compare the actual rates offered and consider whether your budget could absorb an increase.

Guaranteed Future Value finance agreements

A Guaranteed Future Value, or GFV, agreement sets a minimum future value for the vehicle at the end of the contract, subject to conditions.

These arrangements commonly offer three choices at the end:

• Replace: trade in or return the vehicle and enter a new agreement.
• Retain: settle the final amount, or apply to refinance it, to keep the car.
• Return: hand the vehicle back under the agreement’s conditions.

The guarantee depends on meeting requirements such as mileage limits, servicing and vehicle condition. Excess kilometres or damage outside fair wear and tear can result in charges.

GFV can suit motorists who want to change cars regularly, but returning the vehicle does not leave you with a car to own or sell. It remains a finance product requiring approval.

Compare the complete cost

Before choosing an arrangement, establish:

• What you must pay upfront.
• The monthly payment and repayment period.
• The total amount payable, including fees and any final payment.
• Which running costs are included.
• What happens if you want to exit early.
• Whether, and when, you become the owner.

If conventional vehicle finance does not suit your needs, consider the alternatives below.

Prepaid car subscriptions: DrivePass

Getting a car does not have to mean taking out a loan or committing to years of repayments.

DrivePass, Cars.co.za’s prepaid car subscription offering, gives you access to virtually new cars—from entry-level hatchbacks to family cars and SUVs, subject to availability.

There are no traditional credit checks or requirements to submit bank statements and payslips. A poor credit score does not prevent you from using the offering.

How does it work?

Choose your vehicle, pay a refundable deposit and your first 30 days upfront, then top up for each additional 30-day period.

Your monthly payment includes insurance, servicing, maintenance, warranty and tracking. Pretty much, add fuel and go. There is a mileage allowance, with additional charges for exceeding it. Tolls and traffic fines are separate.

There is no long-term lock-in or cancellation penalty. To finish, return the car and end your subscription.

You pay for access rather than ownership. However, if you decide to buy the vehicle, DrivePass can help facilitate a separate purchase, subject to the purchase arrangements and finance approval where required.

Browse available DrivePass cars and monthly prices

Personal loans

A personal loan can provide the funds to buy a vehicle outright from the seller. You then repay the lender under the loan agreement.

This can be useful when an older or lower-value car does not meet a vehicle-finance provider’s criteria.

Specialist products are available, including WesBank’s CashPower personal loan, which lists vehicle purchases among its permitted uses. Approval and the amount offered depend on the lender’s assessment.

The amount you qualify for may limit you to an older, less expensive vehicle. Include potential repairs and maintenance in your budget.

Compare interest rates, fees, repayment terms and the total amount repayable against any conventional vehicle-finance offer. A personal loan is not necessarily the cheaper option.

Rent-to-own or rent-to-buy

Rent-to-own offers a possible route to ownership, but that promise can come with a lengthy and expensive commitment.

Ownership depends on completing the contract’s requirements, potentially including a final lump-sum payment. If you leave early, you may have paid substantial amounts without acquiring the car, and further charges may apply.

Check the total payable, vehicle condition, maintenance obligations and exit terms. Being approved does not necessarily mean you are getting good value.

If your immediate priority is reliable transport while improving your financial position, compare the offer with DrivePass before committing.