Tips for buying & insuring a used or ex-rental car

If you need to replace your vehicle, but cannot afford to buy a brand new one, a reliable used or ex-rental car can present an attractive value proposition. Budget Insurance presents a handy guide to purchasing and insuring a 2nd-hand or former hire car.

Cars.co.za lists thousands of new- and used cars listed by hundreds of respected dealers countrywide – you’re highly likely to find a vehicle that suits your wants and/or needs on our site! But, before you begin your search, let’s explore what you should be looking for when shopping for a used or ex-rental car.

If you are a 1st-time car buyer (or have never bought a used vehicle before), this article may help you make an informed purchasing decision. Before you hit the road with your new wheels, however, it would be wise to make sure that your new car is sufficiently insured too. To that end, Budget Insurance also details some of the myriad policies, premiums, and coverage options that are available to you below…

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Is it a good idea to buy a used or ex-rental car?

Yes, absolutely. Some regard hire vehicles as “dour, hardworking appliances”, but an ex-rental car can be quite a sensible purchase because it offers some peace of mind. A car rental company can’t afford to have damaged or unreliable vehicles in its fleet and therefore maintain those vehicles strictly. Also, such firms keep their inventories up-to-date by regularly selling off older cars to purchase new vehicles.

Don’t forget, car rental companies favour models of well-known and trusted car brands. That means an ex-rental car should retain its value over time and have a relatively low cost of ownership in the long run.

Buying a used car can also be a smart choice, provided that you purchase the car from a reputable seller (who has maintained the vehicle well) or a dealership that can vouch for its warranty and service history. So, do your research, conduct inspections, take test drives and review the histories of all the vehicles on your shortlist. If the car you choose has a complete history and its condition accurately reflects its age and mileage, you can expect it to be reasonably reliable (as long as you service/maintain it correctly).

Check our library of Buyer’s Guides of popular used-car models

Benefits of buying a used or ex-rental car

There are several benefits to buying a used or ex-rental car. Some of these include the following:

1. Lower prices and savings

Used and ex-rental cars tend to be priced keenly; private sellers want “money in the bank”, car rental firms want to “free up space” and dealerships don’t want cars to “sit on their showroom floors” too long!

Note that should you want to resell your car one day, it will have a lower resale value when compared with a car with only 1 previous owner. Having said that, new cars are known to depreciate rapidly during the first few years of ownership, while (obviously older) used vehicles have already undergone the steepest part of that depreciation curve. A 2nd-hand car will lose value at a slower rate over a comparable period.

2. Well-maintained candidates

To reiterate, ex-rental cars have been well maintained with regular service checks, because it is in car rental companies’ best interests to keep their fleets in top-notch condition.

3. Affordable finance options

If you are creditworthy, new- and used car dealerships can provide you with financing options through accredited South African financial service providers. But don’t worry, so can car rental companies!

4. 30-day exchanges

Some vehicle hire firms offer a 30-day exchange plan should you not be satisfied with the mechanical condition of the ex-rental car that you have purchased. In that case, they will replace it with a similar vehicle (or one within the same price range).

7 things to bear in mind when inspecting a used or ex-rental car

Check the mileage – an ex-rental car tends to have a higher mileage on its odometer than a typical used car of the same age. However, most former hire cars for sale are less than 2 years old and have clocked up around 100 000 km. If a car is a little older, choose one with the lowest mileage.
Confirm ownership – request registration details and proof that the car has been bought directly from the manufacturer.
Look at the service history – make sure the car comes with a full service history. If there’s a drop in the documented mileage between services, for example, it could be a reason for concern.
Check the service plan intervals – a failure to adhere to the regularly scheduled service may make a manufacturer’s warranty invalid. Double-check this with the car manufacturer.
Opt for an Extended Motor Warranty – ask if there is an option to extend the car warranty through an accredited insurance provider, such as Budget Insurance.
Confirm any accidents – ask the rental company or the original/previous owner for detailed records of all incidents involving the car, as previous damage repairs may affect the vehicle’s residual value.
Consider a trade-in – if you’re replacing an existing car, some car rental companies may be open to a trade-in to help sweeten the deal. You can also sell your car to dealers via Cars.co.za Sell Car.

Getting car insurance for a used or ex-rental car

It’s advisable to take out an insurance policy for your car, regardless of whether you buy it new or used, because it will provide cover against damage or total loss of your vehicle through fire, theft, or a road accident (such as a traffic collision), as well as repairs to a 3rd party’s car or property (if required).

Note that it is mandatory to have car insurance if you acquire your vehicle through a finance agreement (car loan) with a bank. Also, bear in mind that when you take out insurance cover for a used or ex-rental car, there are factors you need to consider that will affect your monthly insurance premiums.

Age and mileage. Your car insurance premiums are influenced by a variety of factors, including the vehicle’s age, make and mileage. The insurer will take into account the condition of your newly purchased car. Older car models or those with high mileages may have lower premiums.
Vehicle history. A car insurance company will check the car’s history for accidents or prior insurance claims, which will affect the monthly premium and cover options.

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What type of car insurance is best for a used or ex-rental car?

Comprehensive Car Insurance encompasses cover for loss, theft, and damage to your car. It also covers fire damage and damage to a 3rd party’s property or vehicle – even if you’re the cause of an accident. Typically, comprehensive cover is best suited for high-value or newer vehicles.
Third-Party, Fire and Theft Car Insurance covers you for theft and fire damage to your car, and 3rd-party damage you may cause in an accident. It’s a good option if you only need cover for specific risks, have budgetary restraints, and own a vehicle with low market value, such as an old used car.
Third-Party-Only Car Insurance will cover damage to a 3rd-party’s vehicle or property that results from an accident that you caused. Third-party-only insurance is also suitable for older vehicles with a low market value. While it does save on premium costs, remember that it offers limited coverage.

Did you know? Budget Lite Insurance is tailor-made for vehicles under R250k

Want to know more about car insurance?

We hope that you have found this car insurance guide helpful. Remember, if you want to learn more about car insurance or review your car insurance requirements with the help of experts, Budget Insurance’s team is always ready to assist. Contact them on 086 1600 120 or utilise their online car insurance calculator, which gives you an accurate and budget-friendly quote in minutes.