The automotive sector has endured sustained pressure for several months now, exacerbated by the relatively high cost of vehicle ownership as a result of increased fuel prices, high inflation and high lending rates, among other factors. The impact has been felt across the board, including the budget and premium segments.
“At times like this,” says Lebo Gaoaketse, Head of Marketing and Communication at WesBank, “it’s important for car buyers to equip themselves with all the information available to help them get the best deal when approaching lenders to finance their dream car.”
According to Gaoaketse, it starts with building and maintaining a good credit record and credit score.
“A customer’s credit record and credit score are the first variables lenders look at when reviewing a vehicle finance application. These have a bearing on whether the application will be approved and the interest rate that will be applied on the deal. This makes it vital to maintain a good credit record, even in tough economic times,” he says.
Independent credit bureaus maintain detailed records of consumers’ credit history and assign a credit score relative to the person’s credit profile. This information is available to lenders who use it to determine a client’s risk profile.
“Instead of defaulting on payment on any existing credit account,” urges Gaoaketse, “it is best to approach the lender to arrange payment terms. In most cases, lenders have facilities in place to help customers who run into financial problems to ensure that they are able to continue servicing their debt.”
The next set of factors that lenders consider when reviewing a vehicle finance application are referred to as asset risk. These include variables such as the price of the vehicle in relation to the applicant’s disposable income.
“This is why it’s sometimes important to park the emotions and be more logical in deciding whether to buy a new car or a pre-owned model, choosing a premium brand or going for a more budget-friendly option,” says Gaoaketse.
Other factors that are considered at this stage include the contract term or finance period, whether a deposit is paid, if a balloon option is chosen, and any other factors pertaining to the deal structure.
“Demographics such as race, age and gender are collected for regulatory statistical purposes, but they have no bearing on interest rate calculations or the final outcome of an application,” he says.
“Even when your vehicle finance application is approved, don’t settle for the first finance offer that’s put on the table. Shop around and compare what different lenders can offer. If the terms are not favourable or the price doesn’t align with your budget, be prepared to walk away. The cardinal rule in buying a car is patience and persistence. Remember, there are always other cars and financing options available,” Gaoaketse concludes.