One way of solving this problem is to buy used, which is probably a wiser choice considering the car has already taken its depreciation “knock” and will offer more value.
Getting finance when buying new or used can be a challenge in our current economic climate. Once you have the keys to your brand-new or slightly used car, you slave yourself for years paying it off and once you actually own it, it’s not that desirable anymore. The whole idea seems a bit silly, really.
You will want another car and the cycle will start all over again. Of course, though, there is the problem of selling your car again.
Firstly, you will experience the full-on depreciation depression if you bought a new car or your now third-hand pride and joy will induce the cheesy grin of a used-car salesperson while he informs you that your car is worth diddly squat.
But what if we could take the dealer and owning a car out of the equation?
The option to lease a car is something I have never considered, so I decided to do some research and approached a car-leasing company.
The idea behind leasing a car is similar to renting a house: you pay for the vehicle over a set period of time and when you are done, the car goes back to its owner, or the leasing company, in this instance.
The benefit of this is that people who have been refused finance at a bank or cannot afford a down payment are accepted at leasing agencies and it allows them access to transport.
To determine the cost-effectiveness of the leasing alternative, I used a Hyundai i10 1.1 GLS manual as a base car from which to compare costs. The company I approached offers leasing deals with cars of up to the retail price of R250 000, but the i10 is a more popular choice among consumers.
Many companies offer two payment programmes, including the one I approached for my research. Let’s call these plans ‘X’ and ‘Y’.
Plan X will include basic servicing in the monthly instalment and Plan Y covers other items such as brake pads and tyres. Both plans include vehicle insurance with an excess of R2 400 in the event of an incident and R400 to replace the windscreen. Plan X costs R3 100 per month over a 54-month period for the i10, whereas a similar hire purchase contract over the same period would cost around R3 800 per month with comprehensive insurance included.
A few issues with leasing are that you may be liable for any abnormal wear and tear or modifications that increase the vehicle’s level of depreciation.
In our case, the plans allow for 48- and 54-month deals with 100 000km and 112 000km mileage restrictions, respectively, which mean that if those figures are exceeded, you will pay a penalty.
The other issue is that you are locked into the deal for its duration, unlike hire-purchase contracts where you can sell the vehicle for something else and in rare instances have some money left over for a deposit on a new vehicle.
Our said company does offer the option to get out of the contract by levying a fee of 10% on the outstanding balance. So say you want out of the deal after 30 of the 54 months, you will pay 2.4 monthly instalments, return the car and your contract will be over.
As with any contract though, beware of fine print and ensure that you take out a closed-ended lease where no depreciation charges can be thrown in at the end.
Although it may be all inclusive and cheaper than hire purchase, leasing a vehicle means paying for something that is not yours, although you have the option of buying it after you have paid some R167 400 for it already (still keep in mind, though, that this amount has included your services, insurance and the like).
I believe that if a person cannot receive finance, then leasing is a viable option. As a person who can get finance, consider the merits of owning a car that is paid off as opposed to starting a new lease agreement out of necessity.
So as previously stated: yes, it seems silly to slave and pay off a new or used car, but that is the nature of the world. How could we afford anything without paying it off? Besides, does working for 54 months to pay off somebody else’s vehicle debt sound any more logical?