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Buying a car? Useful terms to know

Buying a carBuying a car
Buying a carBuying a car

 

Buying a car? Useful terms to know

Buying a new car can be both nerve-wracking and thrilling. You have most likely been looking for the perfect vehicle to suit your needs, and one that looks fabulous when you drive it around town. But it can be tricky for new car-buyers to handle the new terminology they will learn along the car buying journey.

When you visit  second-hand car dealers in Gauteng and surrounds to look for a new car, there are some terms that are useful to know. For example, how many kilowatts the engine has, what ABS brakes are and what a warranty is. Confused about what these mean? Outlined below are some of the most useful terms to know when buying a car.

 

Offer to purchase

An offer to purchase is a document or documents that provide the dealer with all of your pertinent information. It includes all of the details about the vehicle you want to purchase and your own financial situation such as a credit history check or financing documents.

All of the reputable car dealerships in Gauteng will need these documents when you apply for second-hand car finance from them. It is considered to be a legally binding contract and you will have difficulty cancelling it. Be sure to read all of the stipulations of the offer to purchase.

 

Annual percentage rate or finance rate

The annual percentage rate (APR) is, in simple terms, a loan’s interest rate. It is the percentage that a lender or bank will charge annually on the amount borrowed and it is vital to know when looking at both new and used cars.

For example, your APR might be 14%, and you will have to figure out if you can afford this rate every month. You will need to take a look at your finances and draw up a budget before heading out to a car dealership in your area. You could also speak to your lender and negotiate a better APR based on your salary and credit rating.

 

Balloon payment

Many people do not fully understand what a balloon payment is. A balloon payment can be understood as a loan that pays off part of the car and requires you to repay a large sum (the “balloon”)  once your loan period is over.

Your monthly payments will be reduced, which is one of the major benefits of opting for a balloon payment. But a balloon payment might not be the best choice for everyone financially, so you will need to assess your budget and see if it allows for this. Speak to the dealer or your lender about the options available and choose one which best suits your needs.

 

Extended warranty

An extended warranty is an important term to know and understand. It is a warranty which gives you extended cover once the original warranty has worn off, which can be beneficial for those who might have a tighter budget.

You have a year to decide on whether or not you want to take the dealer up on their offer of an extended warranty, so do not feel pressured when you buy your car initially. The price will be negotiable and you will need to keep your budget up-to-date in order to see if you can afford it or not. Think carefully about this option when considering your new car.

 

Down payment

Down payments are popular among new car buyers. A down payment is cash which you pay upfront in order to make the loan smaller as well as the monthly payments you will be making. If you have the savings for this, a down payment can be an affordable option for those want to save money in the long run.

Down payments are not returned to you once the loan is over and it is optional. If you have money saved that is just not enough to buy a new car, you can use this as your down payment to secure a more affordable loan and buy the car of your dreams. Be sure that you do not need this money for any other important purchases before you decide to do so.

 

Dealership dictionary

Knowing these terms will help you immensely when you are car shopping. You will be able to understand the “lingo” that the car dealerships use, as well as have the ability to make a smart financial decision with your lender.

Understanding what an offer to purchase is will help you with the paperwork, knowing what an APR and balloon payment are will help to reduce your monthly payments and being aware of extended warranties can be helpful for deciding on your dream wheels. Soon you will be starting the engine of your dream wheels and speeding off into the sunset.

Buying a car