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Car Loans: How Much Money Can I Borrow? Would It Be Advisable To Lease A Car Instead of Borrowing Money? Companies, Application Forms And Rates

            Do you want the possibility of taking a day off outside the city? Would you like to have a car that drives you wherever place you like? Or maybe you need a new transport to optimize your business or to take your children to school. In any case, if you are thinking about buying a car but you don’t know which quotes and repayment terms best suit your situation and needs, this article is absolutely for you. Furthermore, you will find herein some frequently questions that people, in general, ask themselves when they seek for an auto loan for the first time. Then, of course, you will also find some specific references to the entities that offer online vehicle loan calculators for you to be able to organize your money properly together with their quotes, rates, and application.

Can you use a personal loan to buy a car? Is that possible?

            Deciding which is the loan option that is appropriate for you and your financial situation is not a piece of cake. After reading for a while, I assume you may have noticed that there are numerous companies and banks that offer several lending choices which seem to be affordable and convenient, too. But now let’s get to the point: what is the main difference between a personal loan and an auto loan? Is it possible to use the funds of a personal loan for buying a vehicle?

            In order to answer this question let’s explore some characteristics of each loan option. To begin with, notice that car loans are said to be secured whereas personal loans are unsecured. This means that the former is protected by an asset, that is, once you purchase an item, this element can be used as collateral. In contrast, the latter is just the opposite, and in this case, the loan company assumes that you are capable of repaying the loan by your own means, according to your creditworthiness. Equally important, interest rates also vary as well. For personal loans, interest rates are significantly higher compared to car loans. Generally, only those clients who have good credit scores are the ones who qualify and are approved to get the loan. In the case of car loans, interests are low and fixed and they are easy to be granted because lending institutions do not pay much attention to your credit history. As regards repayment options, they are usually fixed. Personal loans repayments, instead, are more flexible.

            As a whole, I have to add that if you are willing to buy a car, whether it is a new one or not, it is better if you ask for a car loan. Apart from this, this a lending option through which you can have access to a large amount of money.

Is it better to buy or lease a car?

            Well, this is a good question and I bet there is more than one person thinking about it. In general, it is believed that of course owning a car is way cheaper than leasing one. The point here is that if you don’t have the money to afford one, you can benefit from leasing in the short-term.

            But, what if you want to lease a car for the long term? Is that profitable? Let’s explore some advantages and disadvantages of both alternatives:

LEASING A CAR: The main benefit of this option is that clients usually have access to new car models. The costs of leasing are arranged according to the total value of the vehicle but you only have to pay just a percentage of it, together with other interests and fees. This is commonly known as the residential value, which refers to the amount of money a company expects to receive at the end of an asset’s service life. The good side of this alternative is that the price can be negotiated with the dealership.

            The payments are made once a month and are low, too. In the case of warranty, the vehicle is secured so the only costs you may be charged are related to insurance and fuel consumption. As regards taxes, they vary according to the state terms where you live. Generally, you have to pay taxes based on the amount of money that you have spent when you signed the contract and on the payments that you will make each month.  However, in other locations, there is a tax that has to be paid according to the value of the vehicle. Take into consideration that when you return the car, it has to be in the same conditions under which you have received it. Having excellent credit is another requirement you have to meet.

Can you lease a car and then buy it?

            In some cases, you are allowed to buy the car you have leased. Sometimes this option can be considered a good thing since purchasing the vehicle you are using can allow you to save money but this is not always the case. For example, if you have exceeded the car’s mileage or if it is damaged because you have been using it for a while, you are generally charged for these expenses, this means that everything will be up to you. For this reason, it would be advisable that you know exactly if taking this option contributes to saving your money or not.

BUYING A CAR: You can own a car by paying for it with cash or through an auto loan. When you lease a car, you have to make monthly payments for it, but if you own it, there is no reason for making those payments anymore. The truth is that you must have the total amount of money to be able to afford it and that is sometimes very difficult. That is why many ask for loans when looking for buying a vehicle. What is more, there aren’t any restrictions as regards mileages you are allowed to do with your car, contrary to what is set when leasing a car.

What is a good credit score to get a car loan?

            The higher your credit is; the more chances you have to get a car loan. As credit scores range from 300-850, if your credit score is around 750 or above this number, then you are qualified for being granted a car loan. Anyways, this does not prevent you from getting a car loan. If your credit score is under this number, then you may qualify for a used car loan.

           As a whole, I have to say that none of these options is better than the other one, everything will depend on the situation each person is undergoing.

            Now let’s see what financing entities are offering good vehicle financing services in South Africa. First, I’ll refer to Wesbank and then to Standard Bank. Both have useful calculators which will help you determine your loan future expenses and payments.

How do Wesbank Vehicle Finance Calculators work?

            I’ll start referring to Wesbank’s calculators. Among the calculators this entity offers, you can find Vehicle Finance Calculator, Purchase Price Calculator, and Affordability Calculator. I’ll go over each of them so you’ll know how to get the most out of them.

- Vehicle Finance Calculator: you should enter the car’s purchase price, the repayment term you would like, the deposit you think you can pay and the interest rate and balloon payment. Then, the estimated monthly installment will be calculated based on this information.

- Purchase Price Calculator: in this case you’re asked to enter the monthly installment you desire instead of the price of the car, and they calculate the car’s price you should go for, based on this information.

- Affordability Calculator: this calculator will help you discover how much money you are capable of repaying every month after submitting some information about your income and expenses.

What are the requirements?

            Requirements vary according to the kind of car finance you need. For example, if you buy from a dealer or a private seller, or if you use the Graduate Vehicle Finance.

If the car you want to buy is sold by a dealer, pay attention to this:

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- You must choose a car which worth is at least R 30,000 and that is sold by a dealership approved by Westbank. And the buyer, in this case, you, have to be at least 18 years old, be a permanent resident or an SA citizen, own a valid driving license and a positive credit record, and lastly, the buyer’s monthly salary has to be of R 6,250 or more.

- If you are buying to a private seller the requirements for you as the buyer are the same but, the car you’re buying should have been fabricated in the last 20 years and it shouldn't possess records of having been stolen or recovered.

- And at last, if you are applying for the Graduated Vehicle Finance you should know that you won’t be asked a credit history as this loan focus only on affordability.

            Your age should be of 31 years old as top, you should have received an NQF6 qualification in the last three months and you should have a job.

Wesbank Application

            I’ll expand on the application process you need to follow if you are buying a car from a dealer:

1. You have to start by deciding an estimate of your loan using the online vehicle loan calculator.

2. You need to complete the online application form, which will take you no more than 30 minutes.

3. You will receive an instant answer from Wesbank, informing you if your loan’s been approved or not.

4. If your loan's been approved, you’ll be contacted by Wesbank to get information about the dealer you’ve chosen.

5. After the transaction with the dealer ends, Wesbank will give your dealer the finance application approval and the contract.

6. Wesbank will offer you a comprehensive insurance package they call Driva Cover, as your new vehicle needs to be insured before you are able of driving it.

            I’ll add that you can repay the loan in at least 12 months up to 72 months.

What can I find as regards Standard Bank Vehicle Financing?

            In the case of Standard Bank, you’ll find two options to calculate the loan. You have the Affordability Calculator that tells you how much money can you afford or, the Vehicle Finance Calculator that tells you either the monthly installments or the purchase price of the car, depending on the information you need.

            Let’s see an example. If you know the car you want is sold in R 50,000, you enter this number along with a possible deposit you’d pay and the loan term to the Vehicle Finance Calculator.

            Let’s say you pay R 10,000 of deposit and you choose to repay the loan in 78 months. You can also enter a balloon payment, which is the sum of money you need to pay at the end of the payment term, and we can take the prime rate as the reference just for this example, which is 10.25%. Once you submit all these numbers, the calculator tells you that you would have to pay a monthly installment of R 881 for 78 months and, that the full cost of the loan would be of R 74,033.

            Now, what if you`ve just started looking for cars and you want to know how much money can you afford. You choose the Affordability Calculator, and you enter the amount and the length of the repayment term you’d like, the deposit and the rate. For instance, you say you want to pay monthly installments of R 1,000 for 60 months and, the deposit you can afford would be of R 8,500. Keeping the 10.15 % rate you should look for a car which value is R 55,294 or less.

             As you can see, through this really useful tool you can apply for the loan knowing for sure you can afford it.

How to apply?

            To apply for a Standard Bank loan you simply get in contact with them and complete the online application form to get pre-approved.

            You can reach them by phone, by email or you can send them your contact details for them to call you back.

As you can see, it is not that difficult to get a good vehicle financing. There are many more companies willing to help you get the car of your dreams, give them a try!


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Questions and Answers

Can I apply with Wesbank if I’m not South African?
Yes, as long as you are a permanent resident.
Should I enter a balloon payment when I use the calculator?
Only if you want to.
Can I get financed if I’m 17 years old?
No, you must be older than 18.

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