How to buy a first-rate second-hand car

In a tight economy, buying a second-hand car can be a money-saving move. It’s wise to do your homework, though, as used cars can have existing problems that are not immediately obvious.

We investigate the pitfalls attached to pre-loved vehicle purchase, and we offer some tips for avoiding these.

Tip: As with any vehicle, insurance is essential for second-hand wheels. Ensure that your purchase is protected – click here.

Choose the right vehicle

South African consumers often buy vehicles they can’t afford; either to convey a sense of status, or because they don’t fully understand the costs involved.

Status-driven purchases are not restricted to new cars, but can apply to the second-hand market too, where some luxury or high-end vehicles can be found at reasonable prices.

However, when purchasing, it’s important to consider both the costs and the reason for your purchase.

“It doesn’t make sense to buy an off-road vehicle, for example, if you spend 90% of your time driving in the city,” notes Layton Beard, spokesperson for the Automobile Association of South Africa (AA). “Why pay R5,000 a month for fuel, when you could be paying R2,000?”

“It’s important to look for a safe, reliable vehicle that’s fit for purpose and fuel-efficient,” Beard says.

Don’t spend beyond your means

Driving a car that’s beyond your means could lead to unmanageable debt and/or vehicle repossession, cautions Ernest North, co-founder of Naked Insurance.

“It’s unfortunate that people don’t conduct a comprehensive affordability assessment before they make a purchase,” North says. “This includes considering their repayments beyond the current interest rate.”

North recommends considering how much time you’ll spend on the road, and what your monthly fuel spend is likely to be. You should also budget for replacing expensive car parts. A new tyre, for example, can cost upwards of R1,000, depending on size and brand.

Be savvy with financing

Around two-thirds of all cars sold are financed, according to North. However, banks won’t finance cars they consider to be too old or in poor condition, as they can’t be used as collateral.

If you’re browsing websites for a second-hand car, and financing estimates are given, be aware that the monthly instalments can differ. The instalment you end up paying will largely depend on your credit score.

“A poor credit score may lead to finance being declined – or you may pay higher interest because it’s riskier for the bank to do business with you,” says Jamie Surkont, CEO of getWorth.

Your chance of being approved for a loan increases, Surkont says, when you work with an accredited car dealership. They will also try to get you the best possible interest rate.

Some banks will require a deposit, but this depends on your credit profile, and the value of the car.

North says some consumers take out a personal loan of R80,000 to R100,000, in order to buy a second-hand car for cash. He advises against this practice, however, as the interest rate on unsecured loans tends to be much higher than loans to which an asset (in this case, a car) is attached.

Buying from a dealer vs a private individual

Under the auspices of the consumer protection act (CPA), you have the right to receive goods, such as a motor vehicle, which are of good quality, durable over a period of time, and free from defects.

If you buy a second-hand vehicle from an accredited dealership, you will enjoy the legal protection that the CPA affords, as businesses are required to comply with it.

Buying from a private individual can be riskier, as vehicles are generally sold “voetstoots”, that is, just as they are. You may have a common-law case if a seller lies or misrepresents the condition of the vehicle, however, it’s difficult to prove this.

“It’s easier to buy from a dealer as you can ask for certain guarantees, such as a service history, and confirmation that the car hasn’t been in an accident, or placed on the e-Natis list of stolen vehicles,” says North.

However, he notes, if the dealership offers assistance with the roadworthy, vehicle licensing and registration process, otherwise known as an “on-the-road” fee, try to negotiate to avoid overpaying. You can choose to license the car yourself, but this exposes both you and the dealer to risk.

Make sure the vehicle has been inspected

A dealership should be able to provide proof of inspection, Surkont says.

“The inspection should occur before you take delivery of the vehicle. Reputable dealers will inspect the car prior to delivery, but if you want an independent inspection - from the AA or DEKRA, for example - you will have to pay for it.”

Beard says you can take the vehicle to any AA Auto Centre and ask for a 125-point check, which will provide a snapshot of the vehicle’s health.

“This isn’t a ‘pass or fail’ test; rather, it’s an objective analysis of the condition of the vehicle, enabling you to make an informed decision before you purchase,” he says. “You can discuss the findings with the seller and negotiate who will pay for repairs, if needed.”

An inspection will also reveal whether the vehicle’s VIN number is correct, and/or if the vehicle is stolen.

Include a warranty

When choosing a vehicle, think not only about your monthly instalment, but also about what you may need to spend on maintenance.

“Used cars come with risks, especially as relates to mechanics,” says Surkont. “If the vehicle is no longer under its three- or five-year warranty, it’s wise to buy an after-market warranty.”

You can get limited cover policies from around R3,500 a year, depending on the car and the level of cover chosen.

“A solid policy for a car valued at around R300,000 should cost between R6,000 and R10,000 a year,” says Surkont.

“Include this in your budget and buy a vehicle that allows you to afford additional protection,” North recommends.

The importance of insurance

When you finance a car, you’re obliged to take out insurance. This is mandatory for the lifetime of the finance agreement. Cars aged more than eight to ten years may be uninsurable, North says.

Some buyers take out insurance to placate a lender, and cancel it a few days later; however, this is ill-advised.

“Apart from the fact that they’re breaking their agreement with the bank, they’re exposing themselves to an unacceptable level of risk,” says North.

“If the car is written off and the buyer still owes R400,000, the bank will continue to demand the money, plus interest.”

In addition, if you collide with another driver’s vehicle, their insurer will pursue you for damages, in your personal capacity.

“At the very least, try to take out third-party insurance, which costs around R50 a month,” says North.

Finally, when obtaining an insurance quote, be aware that these can be misleading.

“An ad may indicate that insurance ‘starts at R700 a month’, but the true amount may be closer to R2,000,” North cautions. “Ask for a final, committed price from an insurer before you proceed.”

If insurance seems unaffordable, consider getting a smaller vehicle that you can insure comfortably.

Tips for buying a second-hand vehicle

• If the deal in front of you seems too good to be true – for example, the price or mileage seem surprisingly low – ask more questions, or walk away.
• Find out about the after-market support or products the dealer offers – for example, a seven-day or 700km money-back guarantee.
• Be wary if you’re asked to take the car for a roadworthy test and pay the costs yourself. “All cars delivered by dealers that focus on quality should come with a roadworthy certificate, and pass the dealer’s own inspection process,” Surkont says.
• Request the vehicle history from the dealer in writing – it’s just as important as the mechanical condition of the car.
• Make sure the year of registration is as per the registration document.
• Purchase cautiously rather than relying on the CPA process for recourse. “If you’re sold a vehicle that’s not as advertised, an accredited dealer will try to resolve the issue without resorting to the CPA or an ombudsman,” says Surkont.
• Read the terms and conditions of your agreement and understand what you’re being sold. This is especially important when it comes to a “voetstoots” clause.

Tip: Don’t let debt prevent you from buying a vehicle to help you get around. Consider debt consolidation today.