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Is Refinancing Your Car A Good Idea?

vuyi on April 19, 2023

Refinancing your car is an option that many car owners grapple with.  In an effort to de-mystify what this means, and who should consider it as a viable option, it is important to understand what the term ‘refinancing’ means.

In a nutshell, refinancing a vehicle means replacing your current car loan or finance agreement with a new car loan to revise your debt repayment schedule. In other words, applying for another loan to repay your old debt. As the new loan is usually lower than your existing loan, vehicle refinancing may be a way to save money on your monthly car repayments.

This saving can result from obtaining a loan at a lesser amount, extending the repayment period or negotiating a lower interest rate. Some banks and lending houses also offer the option of refinancing a vehicle that is fully paid up, should it qualify.

It is important to understand what the term means and when or when not to refinance a vehicle.  One school of thought advocates that you should rather consider selling your car before you look at refinancing it.  However, the decision is not always that simple.  “If the new loan is at a lower interest rate, for example, that could save you some money in the long run,” explains Lebogang Gaoaketse, Head of Marketing and Communication at Wesbank.

It is important to carefully consider the pros and cons of refinancing a vehicle, so it is advisable to do some research on the most favourable loan terms and interest rates, before making a final decision.

Advantages:

  • Lower Monthly Repayments:  Refinancing can result in lower monthly repayments, which could assist those who are struggling to cover their monthly costs or who want to free up a bit of extra cash each month.
  • Lower Interest Rates: If you qualify for a lower interest rate by choosing to refinance your car, you will save money by paying less interest over the loan term and by so doing, save on your current monthly instalments.
  • Better Loan Terms: Refinancing allows you to adjust the terms of your loan, such as the length of the loan period or the type of loan, for example, fixed or variable.
  • Improved Cash Flow: Refinancing your vehicle might enable you to access more cash it you owe less than its current value.

Disadvantages:

  • Additional Fees: Refinancing often involves fees such as loan application costs or prepayment penalties which could add up and reduce the potential savings from the refinancing agreement.
  • Longer Loan Term: If you extend the length of your loan through refinancing, you may end up paying more interest over the term of the loan, even if you have a lower interest rate in place.
  • Negative Equity: If you owe more on your vehicle than it is worth, refinancing may not be an option or may not result in any significant savings.
  • Credit Score Impact: Applying for a new loan can temporarily lower your credit score if you are approved for a loan with a higher interest rate, it could negatively impact your credit score in the long run.

There isn’t a one-size-fits-all solution to structuring a car refinance deal. By being honest with yourself and knowing how much you can afford on the vehicle repayment, you would be better informed about your options.

You Might Not Think You Need Car Insurance Until Its Too Late

vuyi on March 14, 2023

Let’s be honest; no one gets excited about insurance and having to pay for it.  It is a necessary ‘evil’ which all motorists should have because like it or not, the day will come when its desperately needed.

When you consider the state of our roads and the reckless behaviour of most drivers in South Africa, coupled with the high occurrences of car hijackings, vehicle theft and frequency of road accidents, vehicle insurance is something all motorists should invest in.

In the event something happens to your vehicle, it is comforting to know that you have insurance to fall back on. Comprehensive car insurance is the most recommended option to protect both you and your vehicle, and is usually mandatory if you have a vehicle finance agreement in place. However, if your household budget does not allow for comprehensive cover, then the minimum insurance you should take out on your car is third-party insurance that includes fire and theft. Bear in mind though, that third-party vehicle insurance only covers the damage that your vehicle causes to other people’s vehicles or property.

According to the AA (Automobile Association of South Africa), between 65 and 70% of the estimated 12 million vehicles on South African roads are uninsured, and this percentage is growing annually. If you are involved in a crash, you only have a three in ten chance of the other driver being insured and able to cover any damages. If the accident is your fault, it is even more important to be covered comprehensively.

“It’s for this reason, among others, that, if you are considering cancelling your car insurance to cut back on expenses, to rethink this. If something were to happen to your car, knowing you are covered is one less thing to worry about,” says Kutlwano Mogatusi, WesBank Motors communications specialist.

Car insurance is a way of protecting your car – and yourself – against the harm and the costs if your vehicle is involved in an incident such as an accident or theft. By paying a monthly insurance premium, your personal return on investment is knowing that your vehicle is covered by your insurer. If your vehicle is comprehensively insured with a reputable insurer, you will be covered for a vehicle accident, a natural disaster, fire, or theft. If the unfortunate incident is your fault and damage is caused to another vehicle, driver or passengers, or a pedestrian, your insurance would cover you for that too. Having car insurance is similar to having a safety net should something go wrong.

“Knowing why you need car insurance is one thing, but making sure you choose the policy that will best safeguard your vehicle, is another. The right policy ensures that your vehicle is safe from natural disasters, the threat of theft or fire, third party cover, damages, or even a total write-off of the car resulting from an accident,” explains Mogatusi.

“The best car insurance policies include vehicle repairs and replacements, reimbursement for damages to the other party or parties from an accident you cause, car hire while your car is being repaired and even roadside assistance. When you report a claim to your insurance company, a representative will manage the claims process and assist you with any questions you may have. Shopping around for a policy that suits both your needs and your pocket is advisable. Be sure to read, and understand, the terms and conditions within the fine print too – you don’t want any nasty surprises if you need to make a claim.”

Understanding the factors that can affect the amount you pay on your monthly premium will also help you make an informed decision on which insurance policy to invest in. This starts with the type of vehicle you drive – a luxury car will attract a higher insurance premium, while an older vehicle or a second-hand car with a lower market value will cost less to insure. Even the colour of the vehicle can impact the insurance cost, with white or lighter-coloured cars attracting a lower premium, as will other factors such as your age, where you live and work, and the length of time you have been a licensed driver.

If you are a recent graduate or young professional, and have been driving for less than five years, you are considered to be an inexperienced driver to the insurance company, no matter how competent a driver you may be. The insurer considers an inexperienced driver to pose a greater risk, which will affect your monthly premium amount. How you manage your personal finances, and your credit history will also be considered as the insurance provider needs to ascertain your risk profile when determining your premiums.

While the monthly premiums for insurance may seem like a grudge payment, it is important to consider the alternative: if you are involved in an incident and have no insurance cover, you will have to pay for the damages to your car and the other vehicle from your own pocket, if it is your fault.

“There are many insurance deals for vehicles on the market, so shop around. Also consider the extra benefits on offer such as roadside assistance, discounts for good driving or lowering your premiums annually as your vehicle depreciates in value. Look for the best deal to suit your pocket,” concludes Mogatusi.

The Truth About Vehicle Finance Balloon Payments

vuyi on February 14, 2023

When it comes to vehicle finance, balloon payment deals are possibly the most commonly misunderstood of all installment-type payment options.

In this article, Lebogang Gaoaketse, WesBank’s Head of Marketing and Communication sheds light on the subject of balloon payment deals and shares advice for consumers considering this type of repayment option for their next car purchase.

Lebogang Gaoaketse, Head of Marketing and Communication at WesBank
Q : What is a balloon payment deal?

Lebogang Gaoaketse : When taken at face value, balloon payment deals may seem like an easy way to drive a car you simply cannot afford. You’re basically taking an amount owed on the purchase price of a car and setting it aside, in turn making monthly instalments lower because they are calculated on a smaller initial debt owed to the bank. It’s important to remember, however, that the amount set aside at the start of the deal is still the buyer’s responsibility and will need to be settled.

Q : What are the benefits associated with balloon payments?

Lebogang Gaoaketse : Balloons are designed to help ease the burden of monthly expenses, but the luxury of lower repayments every month does come with a great deal of responsibility for the buyer. When used correctly, the money saved on repayments should more than cover the costs of a loan needed to refinance the lump sum of debt at the end of a balloon term. Put simply, customers should aim to reserve the money they save every month in order to make settling the outstanding amount owed on a vehicle easier after years of driving it.

Q : Saving money isn’t easy even at the best of times but why is there an emphasis on savings when it comes to balloon payment deals?

Lebogang Gaoaketse : Extremely responsible budgeting is key to maximising the benefits of a balloon deal, so if you know you might struggle with saving money every month, then this option is probably not the best one for you.

There is a big difference between being able to afford driving a car and being able to afford owning it.  We advise customers to consider much more than only monthly repayments when calculating vehicle finance affordability. While installment amounts may seem like the bottom line, other responsibilities such as fuel, insurance, tyres, regular upkeep, unrelated living expenses and, in the case of balloon payments, that all important lump sum owed also needs to be taken into account when looking at affordability.

Q : We often hear the term ‘breakeven point’. Tell us what it is and how it becomes a factor when financing a vehicle.

Lebogang Gaoaketse : Breakeven points are critically important to understand.  A breakeven point occurs when a financed vehicle’s trade-in value falls in line with the amount still owed to the bank. Depending on the finance deal structure, a breakeven point may come sooner or later during your term, with sooner always being the goal. By nature, balloon payments will push your breakeven point to a later date within a loan period.

South African drivers have an unhealthy tendency to upgrade their vehicles and enter new finance deals more often than is financially viable. Rolling outstanding debt into a new purchase, or in other words, paying off a portion of your old car while driving your new one is a dangerous trap to fall into. Irresponsible buyers who do this multiple times not only push their breakeven point very far out of reach, but in extreme cases can owe the bank an amount that is more than what their asset, or car, will ever be worth. 

It’s also important to not see a balloon payment as an alternative to a deposit put down at the start of a loan. A healthy deposit on a new or used car will always make your financial road an easier one to travel, as repayment costs and the deferred balloon debt will be lower.

WesBank strongly advises keeping monthly repayments, the value of a current car, and balloon debts evenly balanced.

New or used? Guide to buying your next car

vuyi on February 13, 2023

Buying a car, new or used, is a big commitment, but with proper planning it does not have to be a daunting one.

There is a vast selection of cars available from a large variety of sellers, making it difficult to find the one that’s right for you. The first thing to do is to ask yourself how much you are prepared to spend on a car and to be realistic about what you can afford.

New or used, that is the question

Which of these is the correct choice? There is no right or wrong answer, but understanding the pros and cons of each is vital for making the best decision for you.

Benefits of buying a new car

The upside of buying a new car is the certainty of knowing exactly what you are buying. No one else has ever owned it, and there’s a guarantee that it has no hidden secrets from previous owners.

You also get the advantage of a full manufacturer’s warranty and in most cases, a service or maintenance plan. These plans can vary from brand to brand in terms of length of validity periods and what’s covered, so do your research and compare what’s on offer from different manufacturers.

Benefits of buying a used car

Choosing a pre-owned car or an earlier year’s model might be more prudent for your purposes. Some used cars, including dealer demo models, are often in almost new condition and still benefit from lengthy aftersales warranties and service plans, with reasonably discounted sticker prices depending on mileage and age.

Most car brands also offer approved pre-owned programmes, meaning these cars come with some added benefits such as extended aftersales plans and guarantees. They also undergo thorough checks by certified workshop technicians in order to get the stamp of approval for ‘approved’ status.

While depreciation is an unavoidable reality of owning a car, used vehicles almost always suffer less depreciation from purchase price than a new one. In other words, the original owner, who bought the car new has already incurred a significant amount of depreciation simply by taking ownership. When buying a used model, you’re starting off from a lower initial outlay and the effects of depreciation are felt less in your wallet.

There are some excellent deals to be found in older model used vehicles, but it can also be a riskier purchase as vehicles’ histories get cloudier as they age. Try to identify cars with full service histories, and even better are those with full histories at official franchise dealers. Also, try to take a trusted mechanic with you to view an older car to make sure there are no major issues before taking delivery.

It’s also worth considering buying extended warranties, either from the manufacturer itself where applicable or from a third party.

Start with a budget

The most important part of the car-buying journey is compiling a list of all current expenses and income. It is important to shop around and compare car prices to find a sensible and affordable car that fits within your budget. Don’t forget to budget for fuel, insurance, tyres, service costs and more – and remember that these costs can change over time.

It is also advisable to build some leeway into your budget to accommodate for rising fuel prices, interest rate increases and unexpected costs associated with driving.

Choose a reputable dealer

If a deal seems too good to be true, it normally is. It might be tempting to buy a newer, fancier car advertised at a low price by a small independent dealer or private seller, but you must let common sense prevail. There is probably a reason why that car is priced the way it is, and you might run into issues with it down the road.

It’s safer to do business with reputable dealers who will go to great lengths to protect their reputation through quality products and customer service.

Chris de Kock retires as CEO of Wesbank

vuyi on March 30, 2022

By H&H Admin

After nearly 35 years in the business, Chris de Kock is retiring as CEO of WesBank and handing over to Ghana Msibi.

WesBank today announced that after nearly 35 years in the business, Chris de Kock is retiring as CEO of WesBank and handing over to Ghana Msibi who is the current CEO of WesBank’s motor retail division.

Chris joined WesBank in 1987 and has held the role as CEO since September 2013.

Chris de Kok

Commenting, Chris said that it was time to hand over the reins to the next generation of leadership.

“I am very proud of the business we have collectively built over the years. WesBank is a market leader in vehicle and asset finance with an unparalleled portfolio of partnerships. Our unique model has allowed us to deliver a long track record of growth and returns to the shareholders of WesBank’s parent FirstRand Limited. I am pleased that Ghana has agreed to take on this role and I have every confidence that he will make it a great success.” 

Ghana Msibi

Ghana who has been with WesBank for the last 7 years, said he was excited to step up and lead WesBank.

“It’s a very special business, with passionate people and high quality, long-standing partnerships. It’s a privilege to take over from Chris,” says Ghana Msibi.

Chris will retire as WesBank CEO effective 30th June 2022 but will remain with the FirstRand group for the next twelve months to ensure a seamless handover and finalise a number of strategic projects currently underway.

February 2022 sales best in almost a year

vuyi on March 3, 2022

By H&H Admin

The new vehicle market continued to surge ahead during February, recording its best sales month since March last year.

According to naamsa | the Automotive Business Council, February new vehicle sales grew 18.4% compared to February 2021 to 44,229 units, a performance approaching volumes realised during the second half of 2019. 

“Despite the traditionally short February selling month and in the face of interest rate hikes and fuel price increases, new vehicle sales performed reassuringly well during the month,” says Lebogang Gaoaketse, Head of Marketing and Communication at WesBank. “Consumer demand was strong during February, particularly for new vehicles as opposed to used, borne out by WesBank’s 14.2% increase in finance applications for new vehicles alone.”

That activity was particularly strong on the passenger car dealer floor, sales through that channel growing 27.9% during February, well ahead of market growth. Overall passenger car sales grew 22.4% to 29,563 units with a slightly flatter performance from the rental market this month.

Light Commercial Vehicles were up 9.4% to 12,290 units compared to February last year.

“Although year-on-year growth during February looked inspiring, passenger car sales were actually marginally (463 units) down on January sales,” says Gaoaketse. “Light Commercial Vehicle sales during February, however, were 2,666 units or 27.7% ahead of January, likely as a result of erratic supply continuing to hamper the market.”

The market has further headwinds to face as fuel prices will exceed R21 per litre inland during March and are destined to rise further amidst tensions in Ukraine. Industry could also face additional complications over and above microchips as supply and manufacture is potentially disrupted in the region and Russia. 

“The situation could amplify the divide between consumer and business demand and the market’s already hampered ability to supply,” says Gaoaketse. 

“This increasing amount of pent-up demand may only be balanced by affordability considerations thanks to increased running costs, and household incomes, which remain under pressure.”

It’s a far better situation to be in than weak economic activity and the market is rejoicing thanks to increased activity in sales with the consequent ripple effect throughout the value chain. 

The new vehicle market is already 18.8% up to 85,559 units during the first two months of the year compared to the year-to-date performance of 2021, outrunning many forecasts already made for the market this year.

“This bodes well for the continued recovery of the new vehicle market,” concludes Gaoaketse.

Good start to the new year with impressive January car sales figures

vuyi on February 2, 2022

By H&H Admin

An increase in the cost of living at the start of 2022 did not discourage South Africans from buying new vehicles during January.

South Africans were faced with fuel price hikes and another increase in interest rates as the new year started, but that didn’t deter them from buying new vehicles during January.

According to naamsa | the Automotive Business Council, January new vehicle sales increased 19.5% to 41,382 units compared to the start of 2021, creating a solid start to the year and the market’s continued recovery.

“January new vehicle sales kicked off the year at similar levels to the momentum created during the second half of 2021,” says Lebogang Gaoaketse, Head of Marketing and Communications at WesBank, referring to four months of sales in the period exceeding 41,000 units. “While some purchase decisions may have been deferred out of December into the new year, January sales provide a solid start to the year, raising the hopes of manufacturers and dealers for ongoing market improvement.”

While year-on-year comparisons remain difficult to interpret because of differing pandemic circumstances, WesBank remained positive for a continued slow recovery of the market during 2022.

Both passenger cars and light commercial vehicles (LCVs) started the year positively, increasing 26.6% and 3.8% respectively. Dealer sales in the passenger car space out-stripped the overall market, increasing 33.7%, a very positive sign of consumer demand.

Sales into the rental market also indicate an increase in business confidence and a more positive outlook to tourism with sales in the channel up 21% during January.

“While gradual interest rate hikes are inevitable over the course of the year from their record lows, their impact should be considered within purchase decisions and affordability,” says Gaoaketse. “Rising costs of living amidst more slowly recovering earnings are expected to continue placing pressure on household incomes and the wherewithal for consumers to afford new vehicles during 2022. But price inflation in the pre-owned market and necessary replacement cycles some two years after the onset of the pandemic should be expected to fuel demand.”

Involved in a car accident? Here’s what to do…

vuyi on December 16, 2021

With international travel restricted for South Africans due to the latest COVID-19 variant, there will be an increased number of vehicles on our roads which could lead to a higher than usual rate accidents.

SA Vehicle Sales Figures End 2021 On A Relatively High Note

vuyi on December 2, 2021

Press Release: Wesbank

South Africa’s new vehicle market has been faced with numerous challenges over the course of this year but sale seem to be on the rise.

South Africa’s new vehicle market has faced many challenges over the course of 2021.  However, the first interest rate hike in three years, consecutive fuel price hikes, a new variation on the pandemic theme and the return of load shedding didn’t deter sales too much.

The market’s resilience continued, recording 41,588 sales during November according to naamsa | the Automotive Business Council. This represents a 6.6% growth over the same period last year and a marginal improvement (553 units) over October.

“While it remains difficult to compare data over periods given the uncertainty of the pandemic for the past two years, a more certain sign of market improvement can be seen in a broader view of sales performance,” says Lebogang Gaoaketse, Head of Marketing and Communication at WesBank. “During 2020, just two months of the year exceeded 40,000 units and those were the first two months, prior to lockdown regulations being put in place; five months of 2021 have recorded sales of more than 40,000 units, including the past four months consecutively. Market conditions are certainly improving.”

Year-to-date, the market has recorded 428,131 sales, up 24.8% on 2020’s 342,956.

The Passenger Car market increased 9.4% to 27,828 units. Dealer sales in the segment grew similarly by 9%, injecting much-needed confidence into the retail network’s sustainability as well as an indication of consumer confidence.

The Light Commercial Vehicle segment declined marginally (-0.8%) to 11,156 units with dealer channel sales slightly higher (0.2%) than November last year. 

The rental market once again provided a robust 4,771 sales across both segments, the current travel bans are likely to have an impact on this sector going into the new year.

“While the market is experiencing certain signs of continued recovery, the realities of rising interest rates and fuel prices is expected to impact affordability as household budgets still play catch-up from the ravages of the pandemic,” says Gaoaketse. “These factors are economically inevitable, but will certainly apply pressure to consumers.