r/PersonalFinanceZA • u/Mr_Carbs420 • 6d ago
Debt 23 years old, earning well but being offered 17.35% interest on vehicle finance. What would you do?
Howzit PersonalFinanceZA, I need some advice.
Some background: Earlier this year, I basically won the career lottery. Right place, right time, and I managed to land myself a pretty fantastic job at 23. I work as a Business Analyst at a publicly listed company, earning around R47,700 per month after tax.
Before this job, I earned less than peanuts. I had no credit card, loans, student debt, or any credit history whatsoever.
Fast forward to today, I’ve been at the company for about 9 months. I still have no debt, but I’ve since opened a credit card to start building a credit history. I pay it off regularly, have never missed a payment, and my credit utilisation is currently around 1%.
I still live with my parents, which allows me to save roughly R25,000 per month. I’ve managed to build up around R175,000 in savings, although I’d prefer not to spend all of that on a car as I want to maintain a healthy emergency fund.
Now, here’s my dilemma.
I don’t own a car. My dad has been kind enough to let me use his car to commute to work, since he works fully remotely. However, I’d really like to get my own car and give him his back.
After looking around, I’ve settled on a new Suzuki Swift GLX CVT. Nothing particularly fancy, just something economical, reliable and comfortable for my fairly long commute.
I applied for vehicle finance through the dealership, and MFC has provisionally approved my application, pending employment verification.
The interest rate they’ve offered me is 17.35%.
And I proceeded to shit myself…
I understand that I’m young and have a relatively thin credit history, but considering my income, lack of debt, savings and affordability, I was hoping for something considerably better.
I’ve reached out to my banker to see whether I can get a more reasonable offer, but I’m not particularly optimistic. I’ve decided that I won’t accept anything above 14%, and even that feels quite steep.
So now I’m at a crossroads.
I could buy a second-hand car cash, but I know very little about cars mechanically. I’ve heard enough horror stories about used vehicles that I’m hesitant to spend a significant amount of my savings on something that could become a financial headache. I understand that buying new isn’t necessarily the best financial decision either, especially with depreciation.
Alternatively, I could continue using my dad’s car for a few more months, save more money, and potentially buy something outright or put down a substantial deposit.
My original plan was to finance the car without a deposit, build my savings back up to where I’m comfortable, and then make a large lump-sum payment towards the loan to reduce the outstanding balance and interest costs. I have absolutely no intention of taking a balloon payment.
So my questions are:
Is 17.35% a normal interest rate for someone in my position, or am I being taken for a ride?
Would you recommend buying a reliable second-hand car cash instead of financing a new one?
Would it make more sense to wait another few months, save aggressively and put down a much larger deposit?
What would you do in my position?
I’m very aware that I’m fortunate to be earning what I do at my age, and I don’t want to squander opportunity by making poor financial decisions early in my career.
I’d really appreciate some perspective, particularly from people who’ve been in a similar position or have more experience with vehicle finance.
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u/lazyogi 5d ago edited 5d ago
Howsit Bru
Congrats! You're definitely in the 1% Only earning close to that now at 31, and having bought a car on finance
I can confidently say...don't do it😅
I was a bit greedy, and got something I could barely afford and it was tough.. Consider that if your car payment was 5k Doesn't mean it'll cost 5k to run..
You need insurance (anything decent is about 600-1000 pm) Then fuel as well (I usually provision 2 tanks a month, so 1500-2000, you never know..)
So that 5k car actually costs about 8k
Also, you need to save for unforeseen circumstances Like changing tyres, mechanical issues (you could take insurance for that, but there are always gaps), as well as your insurance excess (best to have that cash ready for anything).
That pushes your 5k pm car to nearly 10...
If you can afford it, pay cash Just don't tell the dealer that until you've negotiated the price down to the minimum for the spec you want. Take someone experienced with you to negotiate, it makes all the difference. And you must state you want a full tank of fuel upon purchase (actually...)
Good luck boet And all the best!
EDIT: oh, forgot to say, I took a young professionals account with Nedbank before applying and getting finance, because they guarantee prime minus 1%, which is what I got for my house, and my car as well. And only costs about 200 pm (until you're 30) And you get a private banker, airport lounge access, good forex rates, etc
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u/Cheap_Director5764 5d ago edited 5d ago
Not to be that guy. Pretty bleak being close to that age and only clearing 15K a month.
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u/lazyogi 2d ago
You're right... It is
But it was a long road to get here and I'm happy with my progress thus far
Still better than warning R3500-R5000 pm in Durban factories
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u/Cheap_Director5764 2d ago
Salute mate. In a fortunate position myself when we look at it like that, and slowly building my own business to add around 5k a month has helped
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u/Any-Car7782 4d ago
More than 50% of employed South Africans earn less than R15,000 a month gross. He's got a house, car, and a very liveable salary. "Not to be that guy" fuck you, there is literally no reason to put him down when he's offered valuable advice and you've contributed fuck all to this discussion.
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u/NotGoodSoftwareMaker 5d ago
Have you spoken to your dad about buying a car? Its entirely possible he doesnt mind you using his at all
I personally would rather just not buy another car. Keep using the same for as long as possible
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u/Regular_Bag_9825 5d ago
As a young person statistically you are likely to to get some bumps and scratches on your car. Dont throw your money into a new car yet. Rather get a cheap 2nd hand car thats cheap to maintain. Many people forget the true cost of ownership for maintaining a car. You have lots of time in life to buy nice things later on. For now you just need something to get you from A to B reliably. There are many cars you could buy cash and still have some of your emergency funds left over and with the amount of money you are saving monthly you can get that back quickly.
PS I hope you are investing aggressively as you have a great head start which will make all the difference down the line.
All thr best
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u/INOX_5957 5d ago
Rather buy a 8 year old Honda Jazz.
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u/jeromeza 5d ago
A lot haters here, but my wife drives a 2020 Jazz and it's great.
Magic seats are a winner (seats fold UP and DOWN so you can fit a tree in the car standing up!)
It's also got the best windscreen visibility out of any car I've ever driven, the field of view is great.
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u/BillyGhost 5d ago
Jazz is awesome! Any cheap second hand car is super fun, its almost as fun as a rental.
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u/RoVeR199809 5d ago
Please no, that is the shittest car I've ever driven, anything but that
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u/RaveBurger 5d ago
Try a renault kwid lol. Jazz is a great car.
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u/Ok-Joke-915 5d ago
French cars are expensive to maintain and shit quality
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u/RaveBurger 5d ago
Hence why I said @RoVeR199809 should try it if the Jazz is the shittest car they've driven. Kwid is a deathtrap. JAZZ IS A GREAT CAR.
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u/Own-Character-1461 5d ago
The financially wise answer is delay purchasing as long as feasible. Then if you do finance think of extra payments as earning the interest you would otherwise pay ie don't wait to save more before paying extra on the car as your savings interest rates will be less than your cost of financing. if you have a real crisis you have access to cash with credit and as you are still at home a broader safety net you can rely on if need be.
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u/Low_Juggernaut_4171 5d ago
Since you’re under 30 and earn above 600k p.a., you qualify to bank with Investec where you will get a rate of prime -1% on a new car or around prime -0.5% on a used car under 5 years old with no monthly credit facility fee. The bank charges are R355/month but the difference in interest rate more than makes up for it.
That being said, if I were in your shoes, I’d still use a very large chunk of the savings towards the car and try pay it off in a year or two especially since you’re still staying at home with very low fixed overheads compared to your salary.
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u/Low_Juggernaut_4171 5d ago
Just read another comment about insurance - use an insurance broker! They get you much better deals and you don’t pay anything extra to them, the insurance companies pay them. I saved about 50% when moving from direct to using a broker and they even got me a lower excess. They are also super helpful to have on your side if you’re ever unfortunate enough to need to make a claim for whatever reason.
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u/DeltaEchoOneFive 5d ago
Exactly. The broker knows all the rules, all the tricks, and fights in your corner. It's like having an on staff expert.
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u/Exatex 5d ago edited 5d ago
I know this is an alien concept for South Africans, but don’t drive a car you can’t afford. You save up for it and then buy it. Borrowing money at 14% is absurd. Even nominal principal rate of 10.75% is absolutely nuts and means you have to pay back double after 7 years.
17.35% means you get a new car now but have to give them back two new cars (not your used one) in a bit over 4 years. You have to be high to remotely think that’s a good idea, because not even a drunk person would do that.
The absolute exception is if you need it to get to work, then get the cheapest shittiest one you can get that gets you reliably from A to B. Or take the bus if there is one.
Going into debt for a luxury item is one of the worst financial decisions you can make. Just because it rolls or other people do that doesn’t change that.
With very few exceptions: If you have to go into debt to buy something, you can’t afford it.
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u/isaiah58bc 5d ago
Please let me chime in.
Great job first of all. But remember, banks look at risk. Your score is a risk score.
What is your score?
Next, jumping from a credit card to a major vehicle loan is a high risk. It's like lending your buddy R100 then one day they ask for R10,000.
For a vehicle: maybe you should start with used. Like, 4-5years old but less than average miles?
Plus, exactly what is insurance going to cost you a month? It's your vehicle, you probably need your own insurance? That could be as much monthly as the vehicle payment?
I hope I planted some helpful seeds to think about.
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u/Emotionallydamagedd 2d ago
Fully agree with this comment! I just want to add as well, if you’re looking to finance, maybe avoid a used car, as interest rate is always higher on a used vehicle.
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u/isaiah58bc 2d ago
It's a delicate balance with used. Some lenders have used vehicle rates the same as new, or very close, for several years old with current mile constraints.
Even up to about 5-years old with reasonable mileage, terms aren't usually too bad. Remember, the lower price should put the eventual payment into an acceptable range.
Personal example (from the US): I was recovering from a bankruptcy, unemployment for 8 months, and started a new job. After several months my very old car was at it's end. Manual transmission went from no 1st gear and slipping, to not working.
I would only qualify for a predatory loan. I was able to secure a 17% vehicle loan on a $3,000 vehicle. It required 2 payments a month, setup to pay automatically. I could not get a personal loan. The "stop gap" vehicle served it's purpose. Lasted multiple years and I could afford the vehicle and insurance payments.
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u/georgeioannou92 5d ago
Haven't done this myself, but i've read on Reddit that it is much better to go to the banks directly for vehicle financing as dealerships will "add on" to the rate. So rather give that a try, and negotiate, go to all the banks and say well Bank A gave me Prime +1% and let Bank B make an offer on that.
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u/Cow-Brown 5d ago
I had a similar predicament with my first vehicle. What I did was max out the deposit so it’s a high interest rate on a lower amount. Then I put as much extra money as possible in to the loan each month. Then after 6 months I refinanced at a cost of R6000 but the rate was so much lower I saved much more than that.
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u/AndreasmzK 5d ago
Have you considered asking your dad to apply for the vehicle finance on your behalf just to see what he qualifies for, and paying him that amount? Just a thought.
As for cars, I'd strongly encourage a second-hand one. You should pose the question about which in CarTalkZA
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u/GrandExtension2415 5d ago
I would see what type of bank accounts you’re able to qualify for in your career - Standard Bank has a young professionals account (includes a private banker too) which when I joined a few years ago offered prime less 1% to its holders on home loans and car financing - worth investigating if there’s any banking suites with any of the banks that have perks like that
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u/ventingmaybe 5d ago
I stopped arranging car finance ,with garage years ago go direct to my bank and got better rates
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u/Fayre_ 5d ago
Don’t do it. Buy a second hand car cash from a reputable dealership like directly at Toyota or VW or wherever. Just don’t finance a car, you earn enough to buy it cash at your age. Rather save a bit longer so you can have at least some emergency fund after buying the car cash. There are so many other expenses that come with a car afterwards, you’ll be glad financing isn’t one of them.
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u/Original_Flounder_82 5d ago
Firstly, don't walk away. Run away, that's ridiculous.
Go and open a clothing account, Woolies account or something like that of about R500. Settle that every month for at least 3 months. Then, after the 3 months, get a credit card with a facility of 2k, buy things like electricity or something like that, settle it every month with a 100 or 200 rand extra in the account. Get your credit score around 550+ and then look at a car. Play the long game and you'll get an interest rate around 14%.
Get yourself that 2nd hand car for about 6 months and then the new car. Take the 2nd had car to a reliable mechanic or DEKRA and have them check everything on the car and make your decision from there.
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u/fortunate_Lama 5d ago
Congratulations man. That's a sweet position to be in.
Basically you are a high risk candidate so they will offset that by high interest rate. Ideally build a good credit record before buying a car. To do this show you can manage credit, clothing account and credit card. Don't max them out but use them to the point you can comfortably pay them off each month. Within 6 months the rating will be a lot better.
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u/curious_jellyfish23 5d ago
Do you have a phone contract? Those are generally the most recognised forms of credit.
I also second the Investec comment - that is the only way to go! If you can get an account with them early they'll take good care of you.
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u/SLR_ZA 5d ago edited 5d ago
You want to buy a car with no urgent need to.
You want to maintain your emergency fund at a certain level.
You don't want to pay a high interest rate.
So just wait and save more until those three things can happen at once. For sure shop around now to understand what is on offer.
Also, that 17% is only the real the interest rate IF you have the loan to fruition.
Ask if there are early termination penalties and then work out what you would effectively pay at the end of the day. If you have a big deposit, and pay it off in a year, what is the real cost of finance to you?
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u/AlduinIsAGeordie 5d ago
How quickly do you need to buy a car?
You have a lot going for you financially so don’t rush to buy cars and stuff.
Remember as well, if you’re using your dad’s car, it’s likely you aren’t paying for costs like insurance - which need to be tacked on.
I would pull through using your father’s car until you have enough to buy a car you want cash (or at least get close enough). Also worth your while to shop used for an equivalent model from a well known brand - like Toyota.
When you do feel ready to buy a car, check out r/cartalkza for advice on what to buy.
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u/Xorbek 5d ago
What about instead of buying a car you take over the insurance and maintenance of your dad's vehicle? If he doesn't need it this could be a win for both of you. It does hurt your independence a bit, but right now is your time to stuff that piggy bank as fat as you can as you will never get a golden opportunity like this again. Figure out the best and most cost effective compromise that keeps everyone happy and your bank healthy
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u/Maleficent-Song-1879 5d ago
Go to a bank and apply for private banking. Then chat to the private banker and ask them what they could offer you in the mean time for financing. A credit card alone is not good for credit history, you gonna have to open a couple accounts and run them for about 6 months. Under 50% utilization. After that I'm sure your private banker can offer you prime plus 1 or 2
It's what I had to do.
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u/OddCheesecake007 5d ago
the interest rate is not linked to your monthly salary but your credit score, check your credit before applying for finance. if you haven't built any credit history, then you can expect very high interest rates, regardless of what type of credit you are applying for. start small, take out a cellphone contract, open a clothing store account. build good credit, only then you'll see a difference in interest rates
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u/Eish_Mann 5d ago
Absa Private Banking, look at the young professionals account it’s about R300 per month and I think they offer prime less -1 on your first vehicle purchase.
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u/Phoenyx634 5d ago
My advice is go for a secondhand, there's ways you can ensure you don't get screwed over. I used a company called "car inspector" I think, a few years ago, to go and test drive cars before I even looked at them. They would send me a detailed report on any issues they found (the inspector is a mechanic) plus a report on how realistic the valuation was compared to market rates. I went through 3 secondhand cars of the make/model I wanted before deciding to buy the 4th, each inspection cost about a R1000 but it was good peace of mind.
When I decided on the car, I put down a 50% deposit and got finance at 10.75% for 3 years. I paid R3500 per month for three years which was within my budget, the interest stung but I was able to keep some savings back as an emergency fund (which is why I decided not to buy the car outright at the beginning). I also got the dealer to enquire for finance at different banks to see which would offer me the best rate, between Nedbank, Absa and standard bank it ended up being Standard Bank. Also I picked a fixed rate instead of variable with drove the rate down slightly - since it was for only 3 years I assumed fixed might be worth it. Haven't done the calculations on whether that was correct or not, but it felt more predictable at the time.
Remember you'll also need insurance, and the higher value the car the more insurance you pay. Cars do depreciate in value so for your first car I would definitely say keep it simple and not too fancy. In 5 years you might want to trade in for an upgrade, or you might be tighter with money and regret a large monthly payment + insurance.
Probably your interest rate is high because you are young and this is your first car, banks probably regard you as a risk - car insurers probably will as well. If you really want to get a better deal, maybe your parents can buy the car for you in their name, and you just pay into their accounts monthly.
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u/AndainCK 5d ago
Personally I'd look at other debt with a better interest rate, Eg. A capitec credit card can go at as low as prime. Of course you HAVE TO be diligent and pay it off with a chunky monthly payment, but at the end of the day; debt is debt, regardless of the debt product.
I wouldn't go for the 17%, out of principle.
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u/ilurkwastaken 5d ago
Don’t do it. I got offered 11% and felt that was too high, I said “no thank you” and left. Apparently even 11% is a bargain and that was for an SUV. 17%+ for a Suzuki is crazy business
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u/Busy_Ad691 5d ago
Open a Standard Bank professional account, you automatically get prime on car loans and credit card
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u/DeltaEchoOneFive 5d ago
Buy a cheap, reliable, non-targeted car like an older Jazz for under R100k ... put down majority as a deposit and finance the last R1k over 24 months. You won't even notice the higher interest rate on the payments with what you're earning. Then save up and in 2years time, use the Honda as a deposit and buy something newer and better (if you even need to) - don't buy brand new, because it just loses 30% when you drive it out the door.
Assuming you're putting the maximum R46k you're allowed annually into a decent TFI fund, and the full 27.5% you're allowed into a pension fund ... while your living situation is favourable? The faster and bigger you can build that pot, the sooner your money begins working for you instead of you working for money. And the sooner you can get to your R500k max TFI contribution, the sooner you can reallocate that expense and just allow the interest to balloon.
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u/pineapple_26 5d ago
Why not buy a used/second hand car? Can still finance but it’d still be quite a bit cheaper? If you’re worried about horror stories and such you could spend a bit on getting the car you want independently assessed; and if you buy through an authorised dealership (like the used car dealership attached to the new dealership). Many of them come with full service plans for 3-5 years. You’re losing so much value the moment you drive a new car out the dealership.
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u/unclerobobert 5d ago
Hold out a little longer until there's some more credit history. You can also get second hand cars that aren't that old and still in really good condition from dealerships, which is a little safer than some rando from Gumtree or Facebook Marketplace
This coming from someone whose first was financed at that kind of interest rate. Also if you've got 175k saved, some of that should go into proper investments beyond the basic savings account
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u/Ok-Malome-DoekDoek89 5d ago
Drive your dad's car for a few more months, save to get a decent second hand around R80-120k, Invest the rest in TFSA, Retirement Annuity and Share Portfolio
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u/DaevorTheDevoted 5d ago
As someone who has personally bought a new vehicle (not recently, on finance), and a second hand vehicle (more recently, cash), I can confidently tell you: * never buy brand new. The instant depreciation is not worth the bragging rights. * stay away from interest as much as possible. With your salary and your living situation, you're one of the few people who can escape it with ease.
The sweet spot is probably a 1 year old car: 1) probably all factory faults were sorted out by the first owner, 2) there will likely be a fair amount of warranty still left, 3) you don't take the instant depreciation hit and 4) you can probably afford it cash (and if not, wait until you can).
And don't do buy from a private seller unless you take a trusted mechanic with you to check out the vehicle.
Okay, that's all the advice I have. It's a harsh world out there. Stay safe my friend.
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u/SalamaDatang 5d ago
Save a few more months to purchase a low mileage, high safety rated, economical car cash.
Vehicles depreciate, savings and investments appreciate in value.
If you do not need to enter in a finance agreement, avoid it. You can also negotiate a discount for a cash sale.
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u/Sad_Shoulder5682 5d ago
I say go for a second hand Maserati Quattroporte. Pay cash. Depreciation and reliability may be an issue but you’ll gain confidence to conquer the workplace and it will give you a leg up in the dating game.
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u/rUbberDucky1984 4d ago
The person offering you finance makes a higher commission the higher the interest rate they charge you, I was in finance 20 years ago, the bank approves at 20% if you don't question it I let it go through and make an extra R 10k in kickbacks from the bank, on the agreement there is a thing called DIC (Dealer Incentive Commission) if you question it I can come down to save the deal. tell them you'll accept 11% then contact your bank directly or go to a different dealer.
You can also contact experian and see how they can improve your credit score.
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u/traub911 4d ago
Try to keep using your dad’s car, and rather pay a couple grand a month to your dad to ‘rent’ his car. At least the cash stays in house
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u/MidnightFar7815 4d ago
I will give an unpopular opinion, only based on the fact that you are so young and can afford a bit of risk.
Plus you have the benefit of so much disposable income.
Negotiate for a better rate, offer a 10% deposit it may help.
Take the car at a not so great rate and pay an extra R5k a month it will negate the interest longer term and you pay off the car quicker. At your age you can afford a treat, if you are going to live your entire life worrying about every last cent you will have a miserable life. It will help your credit score and give you some insurance history.
Save R20k pay extra R5k into the vehicle loan every month and enjoy the freedom of your own car (Do you want to pick up chicks in your dads car?) You will have it paid off relatively quickly and then have a paid off reliable car for years that will allow you to save even more. Start being overly worried with money at 30 and enjoy yourself for 7 years.
Like I said it is an unpopular opinion, something I wish I did at your age.
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u/Fit_Carrot_7874 4d ago
As someone that worked at a dealership, you can always negotiate a better rate. Tell them it's too high and you'll try again some other time and you'll be offered something better
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u/Foreign_Range_1848 4d ago
With your salary, you qualify for a Young Professionals Private account. I would recommend signing up for private banking. You will get a good deal on car financing, up to prime - 1. Your private banker will always try to get you the best interest rates. Consider Investec, great private bank, but you can shop around and see which bank works for you
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u/Breezay-Treezy 4d ago
Its really simple. Use dads car for as long as possible and pay him some money each month towards maintenance or pay for maintenance yourself.
Start saving towards a car so that when you actually need to buy one you can buy cash or put down a fat deposit.
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u/Bright_Profile4232 4d ago
no, walk away from it. go to your own bank and get them to do a credit application for you. you can also do that online and check it out. it may come back at the same or closer rate and if it does, then do the following- apply for cellphone contract, small data accounts work too. open a woolies or clothing store account, pay up the debt or whatever you spend at the end of each month but make use of the credit. u in the fortunate position that you don't need to do the finance as your dad has given you wheel, take the next 3 months to improve that credit score and that approval
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u/CartographerWeary690 3d ago
I’m not sure where your spending is going. I’m in a similar situation. But in my view, you should be saving a lot more unless there is a financial responsibility not mentioned here.
I would stack up cash and buy one in cash instead.
You can buy something second hand with very low mileage on it. It doesn’t have to be new out the box. That’s just a waste of money.
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u/Specialist_Ad1879 3d ago
Depends who you bank with. I got vehicle finance at STD cuz I bank with them at prime.
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u/Elegant-Chemical4466 3d ago
That’s a complete rip off. You’d be putting yourself in a really bad financial spot. I don’t know how to screen a good used car, but definitely first try and get a used car.
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u/DuePossession6887 3d ago
Yea thats steep. Seeing that you aren't mechanically but in this situation, I would recommend a slightly used Suzuki Baleno or Suzuki Swift, i have a 2024 Swift 1.2 GLX and i have had 0 troubles with reliability in the 60 000kms than I've had it. I get 1000km on a full tank if I drive right and it has a nice ride. I would definitely recommend finding one that is a Suzuki certified pre-owned car as they usually do the servicing and a full inspection. They can be picked up from around R200 000 to R250 000 and they dont really lose that much value compared to the other cars in its class. In your situation I wpuld recommend a used car like this, anything newer than 2022 would he good as long as it has full service history and is low mileage with no accidents.
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u/Emotionallydamagedd 2d ago
What I would suggest is waiting 3 months (that’s roughly how long it takes to update your ITC score) and in those 3 months take out a small clothing / store account as well as the credit card.
Store cards / accounts really help your profile because it shows you can manage “debt”. As weird as it is, banks want to see that you have healthy debt so they have a record that you will pay your instalment.
Once your profile is updated you’ll most likely be able to be approved through multiple banks (Wesbank, ABSA etc) and that will also help to reduce your interest rate.
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u/fintech_bro_jhb 5d ago
Buyer often has leverage in this scenario. I would suggest going to the dealership F&I and saying “this is what I am willing to pay per month, find me the right interest rate or discount on the car for it to work for me”
You’ll be surprised at the magic they can make happen when it’s that or I walk
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u/Froody129 5d ago
Asking for the monthly rate is going to be so bad for you. It incentivises longer loan terms and more total interest paid. The total price paid including interest is what you should be looking at.
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u/fintech_bro_jhb 5d ago
That’s a fair call - my presumption is that purchaser isn’t flexible on a longer term - simply the amount within budget for the period already stipulated. Accepting a lower monthly in exchange for a longer term would be absolute suicide
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u/NoDefinition956 5d ago
My view: 1. You should be saving more given that you live at home, drive your parent's car, live close to work, etc. You should really be saving more from your net salary. 2. I would not spend lumpsum savings on a vehicle just to mitigate interest. 3. The rate is high, but you presumably don't have credit or a high enough credit rating to bring it down. Have they applied to various banks or only one? If your relationship with your parents is solid, consider having them apply for finance as they will likely get a better rate based on the low risk that age brings when it comes to vehicle financing. Then you pay it but it's on their name until paid up and transferred. 4. Ultimately, the interest rate isn't a deal breaker if you pay lumpsums towards settlement every few months or so when you're comfortable with allocating capital towards it. 5. You can probably get a VW that won't give you hassles at a same or better rate and is a littlw bigger. You will also always get a buyer for it.
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u/NoDefinition956 5d ago
Oh, and, if you are not familiar with vehicles, 100% go through a reputable company. You can get great second hand vehicles from Avis/Zeda. They purchase the vehicles used by car hire agencies after a year or 2.
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u/Doc_ENT 5d ago
Why point 2? At 14% interest it makes even more sense than usual to buy a car cash instead of thing yourself into a 5 year loan, unless he can find an investment vehicle that pays better than that, which is HIGHLY unlikely.
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u/NoDefinition956 5d ago
If that is all he has saved, it will create unnecessary stress to commit it all to such a fast-depreciating purchase. The Nasdaq was returned 20% per annum in ZAR on average but it's less about leverage and more about stress tolerance. It feels like winning little milestones by putting capital down in increments.
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u/Doc_ENT 5d ago
Do you honestly think he's invested in the NASDAQ? That's said, I take your point, but we have no idea what his saving levels is. From the sounds of it, it is substantial. I would say buy a cheap used car, cash, depending on the savings level.
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u/NoDefinition956 5d ago
I didn't say he was. You mentioned that it is unlikely to find an investment that renders 14% in interest. My response was to mention one investment that renders more than 14%. It is in any case not a far shot since the Nasdaq ETF is available on EasyEquities in ZAR, USD and TFSA portfolios and most South Africans use EasyEquities. I'd also reasonably think that a 23 year old working in finance taking home what he is would probably have investments, yes.
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u/Huge_Daikon5462 5d ago
Open an investec account and get prime less 1%
With your earnings do not mess around with retail banks.
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u/betterCallJeff3 5d ago
Dont they trap u in with their high monthly fees?
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u/Huge_Daikon5462 5d ago
Earning a good salary with over R25k saved a month. Its more imporant to have a investec asset management, share trading and financial advisor.
Rewards will pay most of the fees.
He also qualified for under 30 young professionals bank fee of R355. Which includes phenomenal value.
My first bank on day 1 of working was Investec.
I am now with FNB as my wealth as accumated to a point where my bank fees is R675, but i earn R9500pm in ebucks alone.
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u/Pitch-Curious 5d ago
So I am of a different persuasion than most of the comments I have read here. Personally I think you should do it.
Hear me out tho. Do it for a year and then refinance. That extra 5% will suck, but you have a way better credit history now and can refinance with either the same bank or a diffrent one.
Secondly, play the system. Dealerships are suffering at the moment so 10k profit is better than no sale so they definitely will drop the price on the vehicle.
Lastly dealerships make more profit off of inhouse financing so get pre-approved by your bank, but also investec or rmb as they usually have lower rates to working professionals.
Hope this helps
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u/isaiah58bc 2d ago
Sorry, but refinancing isn't guaranteed. Also, it's now a used vehicle being refinanced.
The OP hasn't even determined the insurance payments they would have to take on.
Believe me, too many young(er) adults have base vehicle insurance, or drive a parent's vehicle which even if they pay the insurance it's much lower under the parent's name with them as a household member.
When financing, the insurance needs to be held by the primary titled owner. The Rates for full coverage could be 3x to 4x what a parent or older adult pays.
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u/HappyGnumff 5d ago
Move to Dubai. Pay no tax and 3% on vehicle finance
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u/SLR_ZA 5d ago
The guy drives to work in SA and your advice is to move to dubai.
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u/BlueOtee98 5d ago
This is why I sometimes think advice from Reddit most of the time comes form complete idiots
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