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FINANCE (2)
Leasing
As of June 1 this year, leasing, once the preserve
of the business vehicle operator, was opened up to
private individuals as well. The lease option is still
ideally exercised by individuals who change cars more
frequently, and allowance users, or individuals who,
in using their vehicles in the generation of income
or for business purposes, have the option of claiming
the total monthly payments as a tax deduction.
As opposed to an instalment agreement, ownership of
the car does not pass to the consumer at the end of
the lease agreement. The following end-of-lease options
exist: You could purchase the vehicle, sell the vehicle,
or lease it for a further period. To reduce monthly
payments, you could also utilise a balloon payment
option.
Vehicle: Toyota Yaris T3
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MODEL
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INSTALMENT
AGREEMENT
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LEASE
AGREEMENT
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LEASE
AGREEMENT
WITH BALLOON
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| Deposit |
10% - R11 170
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R0
|
R0
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Interest rate
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11.5%
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11.5%
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11.5%
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| Repayment period
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54 months
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54 months
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54 months
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| Payment frequency
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12 payments
p.a.
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12 payments
p.a.
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12 payments
p.a.
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| Monthly payment
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R2 393,45
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R3 659,39
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R2 182,71
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| Residual value/balloon
payment |
R0
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R0
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R33 510 (30%)
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Rental
Rentals are popular overseas, but not locally as South
Africans prefer to own their vehicles. Renting is
similar to leasing in that you use the car for an
agreed period of time and then return it. The residual
value risk remains with the rental company or credit
provider, which retains ownership. VAT is payable
on the rental, and usually there is no option to own
the vehicle in the traditional sense.
The main difference between a lease and a rental agreement
is that on a rental agreement, VAT is paid on a monthly
basis on the payment due rather than being capitalised
upfront. Therefore, the VAT does not make part of
the original debt, as it does with leasing.
Fixed or linked?
Currently, the prime lending rate is 13 per cent,
but that doesn't mean the situation will remain the
same. A few years ago the rate exceeded up to 20 per
cent, and even a one per cent change can result in
you being unable to afford the increase if your interest
rate is linked to the prime lending rate. As a result,
some people prefer a fixed interest rate, which is
usually higher than a linked rate, but will not change
if the prime lending rate goes up or down, and will
therefore make it easier to budget for your purchase
in the long term.
Home loan
This is a frequently ignored option, though one that
works well… providing you are strict with your
payments. Mortgage rates are generally lower than
car finance rates, resulting in lower monthly payments.
However, if you include the car's cost in your home
loan, and pay off the car over the full 20 years,
you'll end up taking the most expensive option. Stick
to the usual finance period of 54 months.
Paying too much? (The National Credit Act)
The NCA regulates and caps fees and service charges.
Although banks may reflect the same fees, you may
find it possible to negotiate on terms and the interest
rates. In accordance with the new legislation you
are encouraged to request several offers and compare
them before deciding on the best one.
In terms of the new act you have the right to:
- A written quote upfront from a service provider
detailing, among other things, thefinance
structure, interest rates and all associated fees.
- Receive and review quotes from other credit providers
before deciding on the best option.
- Insist on information that's clear, easy to read
and understand.
- Verify the offer and all associated terms and
conditions.
Even after you've done all your sums, you might
find your monthly payment looking rather inflated
from what you had expected. It is important to ensure
that all value added products and services, accessories,
fees and other charges are within the act and as agreed
to by you (the client) and the dealer.
One reason for inflated repayments could be delivery
fees – this fee, charged by
the dealer, can also be worked into monthly payments,
or be paid in cash. This is usually to cover the licensing
of the vehicle, new number plates and sometimes a
tank of petrol.
Visit www.nedbankvehiclefinance.co.za
for more information and services offered.
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