Buying a car in South Africa is probably the most expensive purchase that people will make after buying a home. It is something that has to be carefully considered – especially if you are thinking about helping someone else buy a car. If you make a hasty decision to help out, the financial consequences could be serious.
“One of the most common reasons people ask family or friends to co-sign on a car loan is that the vehicle they want to buy is beyond their financial means, or they have a bad credit record,” says Des Fenner, General Manager of Datsun South Africa. “Getting that vehicle means having someone else with a good credit record and earning power put their name on the dotted line, but in many instances the risks outweigh the benefits in this situation.”
The risks of helping someone else buy a car:
• Somebody else will be driving, but you’ll have to accept a great deal of the risk if the car is involved in an accident, with insurance excesses to be paid and other claims met.
• To safeguard your investment, the chances are that you could find yourself funding insurance premiums and even maintenance costs.
• If the person you have signed with does not make a payment, you will be expected to do so. Paying one instalment is bad enough, but what if you end up paying even more? Can you afford to be paying for a second car that is not yours? By offering someone else help, you may find that you do not have enough financial resources to qualify for a car loan of your own.
• A missed payment could see your credit record being negatively impacted.
• If the other party makes no payments, you will be held responsible for the entire debt – not just the portion you have offered to pay.
• If the car is repossessed, you could find yourself having to pay additional costs if the car is sold by the bank and they do not get the expected price. Legally, you will be forced to pay for the bank’s losses.
• You could end up losing a friend or estranging a family member, especially if you have to chase them about money they have not paid.
Possibly the worst scenario is being left to pay off a loan and then having to take legal action against a friend or relative to get back your money. You may then be faced with the prospect of writing off the debt, rather than taking action against somebody you know. Relationships, however, will suffer whatever the outcome.
So, before agreeing to follow the route of signing or co-signing for a friend or relative to buy a car, consider sitting with them and looking at various options. It is also wise to advise them to possibly meet with financial experts who may be able to assist with this process. The outcome could be that the friend or relative is able to find a solution that they are able to afford and pay for independently.
“One of the most obvious solutions for your friend or family member is to buy a car that you can afford by ’buying down’. Alternatively, they could shop around and look at various packages that are on offer. You can help them check what benefits they are being offered and compare each package against the others.
“For instance, with Datsun’s Allin1GO plan, you could find that a single monthly payment will cover a lot of the costs associated with driving a new car. This could help your friend or relative to ensure that one cost not only covers the monthly car instalments, but also items like insurance and a tracking device. These are some of the things that they may not have factored in when looking at how they will be able to afford to drive and look after a new car like the GO,” advises Mr Fenner.
For motorists facing significant cost increases this year, the message is that buying a new car should be something that is carefully considered. The golden rule is for your loved one to buy a vehicle that is within their budget. Involving someone else in the process of financing a car has its dangers. Help them shop around, check prices and benefits – help them make a purchasing decision that is right for them,” concludes Mr Fenner.
For more information on Allin1GO, call 0861 10 65 80, or email firstname.lastname@example.org, or visit www.datsun.co.za