Ernest North, co-founder of AI-driven insurtech Naked, looks at some of the steps to follow before committing to a used car purchase.

Numbers from TransUnion show that South Africans financed around 79 000 used vehicles in the first three months of 2021, with lenders financing 2.41 used vehicles for every new vehicle. Despite this demand for preloved vehicles, not every buyer has a good experience buying a used car, and choosing one can be a stressful process.

After all, for most people, a car represents a significant investment, and the wrong choice can lead to years of inconvenience, high costs and disappointment. The good news is that you can mitigate many of the risks by doing upfront research and shopping wisely.

Digital technology has already streamlined much of the process – from researching your car of choice to getting quotes for insurance and financing. In fact, I know people who have ordered their car online, unseen, and completed all the other steps in the process without needing to leave their homes. This is expected to become a major trend.

Let’s take a look at some of the steps to follow before committing to a used vehicle purchase.

Set your budget

The first thing you need to do is draw up a budget for the used car you want to buy. Do you have cash on hand to buy the car? If not, how much are you willing to spend on your car each month? Bear in mind that you will need to budget for insurance, maintenance, and fuel for your car in addition to the monthly repayment. Once you have a budget in mind, you can start to research your options.

TIP:  Most banks and many car selling platforms have financing calculators on their websites – look at WesBank or AutoTrader, for example. You can play around with different financing amounts, deposits, residuals (balloon payments) and interest rates to get an idea of what your car repayments might be.

Do the research

Before you even walk into a car dealer, you may benefit from reading reviews about cars, visiting car dealers’ websites to get a feel for pricing, and getting feedback from friends and family about their experiences with their cars. Here are a few things you should know as you begin to create a shortlist of brands and models you’re interested in:

• Which features do you really care about — boot space, fuel efficiency, Bluetooth, electric windows, air conditioning, and so forth?
• What are the costs of parts and maintenance? What would you typically pay for a service? Remember that parts for a premium brand or a car that isn’t manufactured locally are often more expensive.
• What maintenance issues or faults do other drivers frequently report about the model you’re considering?
• What is the mileage? You will ideally want a car with mileage that isn’t too high. A high mileage might mean more maintenance costs and more wear and tear.

Shop around

There are many places to source a used car. One of the best options is a reputable physical or online dealership that can offer you the service history and registration papers for the vehicle you want to buy.

Most dealerships that sell new cars from the major brands will often also sell certified pre-owned vehicles, giving you a little more assurance that the car meets minimum quality standards.

While auctioneers may offer some bargains, you will usually be buying voetstoots. Check the terms and conditions before you commit – some auctioneers inspect their cars carefully before sale and offer quality guarantees.

The same goes for buying a car from a stranger via a classifieds site. Buying from trusted friends and family can be a good option, but ensure you know about the car’s history and that you put an agreement in place about what to do if the car shows major faults shortly after you buy it.

Choose a car and make sure it’s in good condition

Having narrowed down your list of models and cars, you can start visiting dealers to learn more. When you see something that fits your requirements and your budget, you’ll want to check the car out carefully to make sure it’s in good condition.

Here’s a checklist you can run through before you commit to the purchase:

• Go for a test drive. Turn off the radio and listen for any strange engine sounds. Pay attention to the handling – does the car drag to one side, for example?
• Inspect the car carefully in a well-lit area — look for bodywork damage or signs of repainting, check that the interiors look good; switch on lights, indicators and wipers to make sure they work; and open and close the bonnet, boot doors and windows.
• Ask to see the service history.
• Look at the mileage.
• Ask if the car has been in an accident.
• Use Autotrader’s Vehicle Check or Lightstone Auto to find out if the police have any interest in the car or if there are any accident reports involving the car. You’ll need the car’s VIN number and R99.

If you are buying privately rather than through one of the major dealerships, it could be worth asking a mechanic to have a look. You can book through Dekra Automotive which offers a service to do this.

TIP: If the vehicle you’re buying is less than a year or two old, it may still have a warranty and service plan. Ask! If it doesn’t, it can be worthwhile purchasing one.

Negotiate the deal

Before doing anything else, do some homework to ensure you’re paying the right price. The Mead and McGrouther booklet can tell you the prices that other cars of the same make, model and year of manufacture have sold for lately. The dealer will probably have one that you can look at.

You can also ask your insurer what the retail value is on the specific car you are looking at. Remember to ask for issues like worn tyres, small scratches and chips on the windscreen to be fixed – and if the seller refuses, push for a discount.

Finalise the financing

If you can afford to pay upfront for your car, that’s the best option because it will save you a fortune on interest repayments. If you can’t, you may need to borrow money. Most dealers have preferred lenders and can help you to apply for the car loan. You will need proof of address and your ID. The dealership will apply to many banks at once and try to get you the best possible interest rate.

The more money you can put down as a deposit, the lower your repayments will be and the less interest you will pay. Be careful about repayment terms. A lower monthly payment over a longer term will mean paying far more money to the bank in interest.

Get insured

Insurance is a must for your peace of mind. Even if the car is a cheapie that isn’t worth covering with comprehensive insurance, third-party insurance will protect you from legal liability in the event of an accident.

While third-party insurance will not cover damage to your own car, it will cover damage to other cars involved in an accident with you.

If you’re financing the car, the lender will insist you get insurance before you drive away. Many dealers offer insurance through the finance house or their own broker. However, it’s a good idea to source quotes independently to get the best deal.

Remember, with Naked, you can buy insurance on the app within a couple of minutes, while you’re in the dealership. You’ll also be able to give the dealership proof of your insurance instantly by getting the documents straight from the app.

This post was based on a press release issued on behalf of Naked insurance.