We are living in times whereby buying as opposed to leasing or renting is seen as a form of investment, the level of achievement, self-worth and so forth. When you are ready to acquire a certain asset, you automatically think along the lines of purchasing it via financing or cash. For some people, it might make better financial sense to lease or rent out assets more especially, if you take the weakening Rand and inflation rates into consideration. Do you fall under this category? Do you believe in the comfort of buying and ultimately owning your assets? If you have not given this much thought. Let’s explore which option/s would best suit your pocket, needs and lifestyle say you had to get a car today.
What personal vehicle financing options do we have at present in the country? What are their benefits and disadvantages? Let’s discuss…
1. Installment Sale
When you are able to purchase a vehicle and pay for it over an agreed period. At the end of the credit agreement and final installment, ownership is automatically passed to you and you can also choose to trade in the vehicle.
BENEFIT – If you own a car you do not have economic penalties or mileage restrictions like when you lease or rent a vehicle.
DOWNSIDE – Service or motor plans and insurance costs are your sole responsibility even before you become the official owner.
2. Lease
When you are able to have uninterrupted use of a vehicle without owning it. However, you have the choice of owning the vehicle by settling/refinancing the guaranteed future value or returning it to the financial institution at the end of the agreement period.
BENEFIT – You can drive a brand new car every 2 to 4 years and enjoy new model advancements like more safety, petrol efficiency and vehicle performance as a whole.
DOWNSIDE – You will be obligated to pay balloon payments at the end of the agreement period. You have an annual mileage limit and if you exceed it the charge per kilometre will vary according to the vehicle purchased.
3. Rental
When you able to have uninterrupted use of a vehicle without the option of ever owning it. You basically pay for the use of the vehicle.
BENEFIT – You have more repayment options such as annual or quarterly repayment plans. You can also negotiate a residual value to reduce monthly payments.
DOWNSIDE – You need to return the vehicle in good condition and within the agreed mileage restrictions and parameters. You will be liable to pay for restoration costs except for fair wear and tear.
If you have a bad credit rating or are blacklisted you can “rent to own” a car for a predefined period of time while driving around in it and paying a monthly rental fee. If you want to terminate your agreement, you need to simply return the vehicle to get your deposit back. If we are still undecided about getting a car why not look into investing your hard earned cash instead?
