Cape Town – Buying a new car can be a daunting experience. And questions like ‘how can I get vehicle finance? Do I need a service plan? How do I know if it’s a dud?’ are always on our minds.

Most of us go about buying a house in the same way: house-hunting for months, on-site visits while scrutinising the property, sorting out finances and contacting the bank well before we’ve even decided on a plot.

Surprisingly, car-shoppers don’t adopt the same principles – often to their determent. Here are a few steps to make the purchasing process more manageable.

Step one: Selecting a dealership

Once you’ve decided on the model you want, Browse says, the most important decision is selecting the vehicle dealer.

Ensure the dealer is a member of either the Retail Motor Industry Association (RMI) or Independent Dealer Association (IDA). These associations have rules of accreditation, codes of conduct and compliance with legislation. These rules and regulations are designed to protect the consumer.

There’s always a chance a dealership might be dishonest in its claims so insist on proof of membership while also checking with the major finance houses.

Step two: The sale

A sales person will prepare a sales-pitch, so take this time to grill them on vehicle specifications, extras, services, warranties and service plans. The sales person will prepare an offer to purchase, which you will need to sign.

Insist on test-driving the vehicle in different types of road conditions. If you feel it is necessary, insist on an independent roadworthy test. Do not purchase a vehicle without test-driving it.

When buying a used vehicle, you need to consider warranty, service and maintenance plans offered by dealers. The finance and insurance consultant can play a critical role in the process. Ensure that the consultant is accredited by the National Credit Act (NCA) to facilitate and assist with both your finance application and insurance/assurance requirements. Insist on a valid NCA agent card to be presented before you proceed with the application.

The card is proof that the consultant is accredited to provide financial advice.

Step three: Finance

Your application will be submitted to a bank of your choice. Remember, it’s your right to choose the bank, so be careful when considering in-house finance not backed by reputable banks. The consultant will advise on the outcome of the application and applicable conditions.

If your application is approved in terms of the National Credit Act, a consultant must provide you with a written quote from the bank detailing:

1 The amount approved
2 Deposit required
3 Contract terms
4 Interest rate (look out for fixed or linked-rates options)
5 Fees and charges payable (the maximum initiation fee allowed by the NCA is R1140, including VAT, and the maximum monthly service fee is R57, including VAT)
6 Cost of credit over the term of the contract.

It’s important to check whether residual-value or balloon payments are included. These are large once-off payments at the end of the loan term and they could have huge financial implications once the contract ends. Take your time considering the quote as it is usually valid for up to 30 days.

Step four: Sining the contract

Once you’ve accepted the quote, a finance agreement will be prepared by the bank for signature.

As the client, these are the following are important aspects of the vehicle purchasing procedure:

1 A good credit history. Any adverse reports/blacklisting and bad credit references will be taken into consideration.
2 A valid driving licence will be required as part of the application process.
3 Proof of insurance will also be required and must be valid for the duration of the agreement.
4 Once the vehicle is ready for delivery, the finance agreement must be signed.
5 Only sign the contract once you’re satisfied with the vehicle.
6 A signed delivery note, once in the dealership’s possession, is as good as cash. A bank cannot withhold payment to the dealers if the client has signed the contract.

Finance agreement checklist:

1 Loan amount
2 Deposit
3 Extras and accessories
4 Terms of the contract
5 Interest rate
6 Monthly repayments
7 Debit order details
8 Payment due date
9 Residual value or balloon payment structure.