A Glossary For First Time Car Buyers
Balloon Payment
A balloon payment is a lump sum payment that must be made at the end of your finance term. Balloon payments generally exist as a way to reduce monthly instalments and are expressed as a percentage of the total price. Taking a balloon payment option means you either have to save up to make the lump sum payment at the end of the term, or sell the car and settle the balloon amount. Alternatively, you could take a new loan to pay off the balloon payment.
Credit Record
A history of your payment of debt. This is stored by credit bureaus and shared with credit providers in order to determine your creditworthiness.
Default
Failing to make a payment agreed upon in your finance agreement. This may have an adverse effect on your credit record.
Deposit
It is an upfront payment that will reduce the total amount of money borrowed from the bank. In general, the larger the deposit you can pay upfront, the lower the total repayment cost and monthly installments will be. No two used cars are the same and deposits can help secure the pre-owned vehicle you intend on purchasing, because there may be other eager buyers looking to buy the same car.
Warranty
An assurance by a motor manufacturer that factory faults or failure of non wear-and-tear components will be repaired or replaced. This excludes wear and tear items, or items damaged as a result of negligence or poor driving habits.
Service Plan
A service plan covers the costs of having your vehicle serviced within a time and mileage parameter stipulated by the vehicle manufacturer. Once again , this is not indefinite – let mention an example of service plans terms !! Although many vehicles include a standard service plan, this can be extended or upgraded to a maintenance plan in-dealer.
Maintenance Plan
A maintenance plan covers recommended services in addition to specific wear and tear items such as wiper blades and brake pads, so a specific duration or time limit.
Payment term
Your payment term is the time period you choose to pay off the loan. Currently, monthly increments can be anything from 12 to 84 months. Shortening the term would increase your monthly instalment and decrease your overall loan repayment amount, whereas increasing the payment term length would decrease your monthly repayment but increase your total loan repayment.
Interest Rate
According to the South African Reserve Bank, an interest rate is the price for loanable funds borrowed for a period of time. Simply put, an interest rate is the price you pay for loaning money from a bank and is expressed as a percentage of the total loan amount. You can choose two types of interest rates, Fixed Rate or Linked Rate.
