Maybe you’ve just passed your drivers’ licence and you want to perfect your driving skills, or you just got a new job and you want some wheels to get you from point A to point B. You’ve already spotted a decent second-hand car, but you don’t know if the creditors can finance it.

According to Warren Kopelowitz, CEO at SA Money Saver, credit providers do finance new or used cars.

The decision to provide credit is based on your credit rating and your affordability, says Kopelowitz.

Should you have a bad credit score, a low salary, or be unemployed, you will be considered a greater risk and be denied credit. If not, you’ll be offered credit at higher interest rates to counteract the risk.

In short, it’s not the vehicle’s age but rather the associated risks of the individual loaning the money.

A bank will also take factors into consideration, such as the deposit for the vehicle or if you’re trading in an old vehicle which shows financial responsibility.

According to Kopelowitz, you can get a car loan, with the option of making a lump sum deposit, and completing the payment in instalments.

While a full loan is possible, it is not always granted to individuals or might be done at a higher interest rate, says Kapelowitz.

You can also opt to finance the car through the balloon payment system, which will entail you paying for the car in instalments for a set period and making a balloon payment at the end of your term.

“While this offer is attractive and lowers monthly instalments, individuals need to remember to save for the balloon payment, as failing to make this large payment will affect their credit score,” advises Kapelowitz. 

The last option for vehicle finance is a lease agreement where you are able to pay a monthly rent to drive the car you’d like, but ownership remains with the bank.

This is available for used cars that are usually no older than 4 years and have low mileage on the clock, says Kapelowitz.

As with all repayment options, you must remember that while paying the vehicle off, it technically is still owned by the bank.

“Until the vehicle is completely paid off, the bank requires you to maintain the vehicle”, says Kapelowitz.

You can also choose to pay cash for the car, purchasing a car that is better suited to your budget.

Kapelowitz recommends that you finance your used vehicle through a reputable dealership.

Banks might not offer the same amount of credit to a vehicle purchased through an individual or unrecognized dealership, he says.  

He also advises that you purchase car insurance. This is usually built into the terms and conditions of the loan agreement – for both new and old vehicles.

According to Alan Koster, head of product at Absa Vehicle and Asset Finance, youshould consider the following points when deciding to purchase a used vehicle:

  • Consider whether the car is worth the price. There may be hidden costs. Remember that insurance and maintenance costs also vary with the age of the car.
  • Important to consider is whether the car has a warranty, service, or maintenance plan, including each of these product’s duration. 
  • Also consider whether you have a down payment or can trade in with equity. A larger deposit lowers your monthly repayments.
  • Look at the condition of the car. A good seller will always have a service book with a full-service history available.
  • Importantly, take the car for a test drive and when doing so, check the vehicle’s mileage. An older car with a lower mileage is likely to be in a better condition than a newer car that has a high mileage.
  • Take a trusted mechanic with you to view the car and test drive it.
  • Make sure you choose a reputable used-car dealer, which will provide you with assurance that the car has undergone the necessary inspections and checks to give you peace of mind.

A great way to find a car at the right price is buying a repossessed vehicle. However, it is important to do your research before you head off to an auction, says Koster.

This article has been prepared for information purposes only and it does not constitute legal, financial, or medical advice. The publication, journalist, and companies or individuals providing commentary cannot be held liable in any way. Readers are advised to seek legal, financial, or medical advice where appropriate.