Beware the sales pitch

Here’s what to look out for when making big purchase decisions.

You’ve been thinking about buying a new car and then your eye catches a TV ad which promises ridiculously low monthly premiums on a zooty new sports model. Soon you’re on the phone to the dealership asking for a test drive. Be careful: what you see isn’t always what you get. Here’s what to look out for when making big purchase decisions.

Buying a car

The financing structures outlined are often too good to be true. Ask the following:

- Is there a residual value in the structure of the loan (or so-called balloon payments)a When choosing a residual plan, you only repay a portion of your car over the five-year loan period, which does keep the premiums low. However, the capital amount not repaid also attracts interest, and you end up paying much more for your vehicle than you thought.
- A car is not an asset, it’s an expense. It loses value the moment you drive it out of the showroom, so buy something affordable and practical.
- Resist the temptation to consolidate your car debt with your home loan, this will incur unnecessary interest.
- Shop around for insurance and ensure it includes “top-up shortfall” cover so that should your car be stolen or written-off in the first year, the insurer will settle the difference between the value of the car and the outstanding debt.
- Check your interest rate. Is it linked to primei Many car dealerships offer their own financing, which should not worry you, but ensure that your terms of purchase are similar to what banks offer.
> Most importantly, read the fine print and, if you don’t understand, ask. Neglecting this point can cost you dearly.

Buying a house

Buy the best home you can afford. This will most likely be your biggest asset, so put time and effort into this purchase. Unfortunately the monthly bond repayments are not the only costs to consider. Add the following and beware the sales pitch:

- Conveyancing plus VAT
- Deeds office, postage, lawyers’ administration fees and FICA costs
- Transfer fees
- Transfer duty
- Bank Valuation Costs
- Rates Clearance Certificate: you will need to transfer six times the average monthly water and electricity usage of the previous home owner to your rates account, to keep the account open..

Tips:
- To avoid excess interest, don’t finance your bond for longer than 20 years.
- Request an access bond and put all your additional cash into the bond. It saves on interest. > Shop around for insurance. You no longer have to insure your home with your bank.

Budgeting for that dream holiday

- Save for a holiday months in advance and pay cash upfront.
- Package deals are convenient, but ensure you know exactly what’s included. Airport taxes are mostly excluded so ensure additional cash on your return to settle these taxes.
- Budget for visa costs. Visas charged in foreign currency might provide a nasty surprise if the rand weakens.
- If you are renting a car, remember that toll gates can be expensive overseas, and there are many of them! Travel costs tend to be very high and parking is scarce.
- Travel out of high season. You’ll have the country to yourself — at a better price!