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Sat, Dec

Are you buying your first car?

Buying a new car is more advisable

Sitsofe, a 40-year-old nurse lives at the outskirt of Accra—a location that compels her to wake up as early as 3 a.m. when most people are coiled in their beds snoring the darkness away. She wakes up that early every day to avoid being caught up in the long queue at the lorry park and she wished this could be over soon. She is also a mother of three teenagers. 

Sidney is 29. He just got a job, yet he is tired of boarding trotros and taxis to the office. He has missed a number of appointments because of the unreliable public transport system. On two occasions, he escaped tetanus wounds from a rickety trotro but had his trousers torn at the buttocks. 

Kwame is retired, never owned a car while he was in active service but after retirement, he has decided to upgrade his means of transport. His new consultancy is thriving and he needs to keep the appearance of a time conscious person. 

John just started a new construction firm. He travels on bumpy dusty road to the sites almost every day in taxis or on motorbikes. Like the rest, he is itching to buy a car. 

There is a common need for all these three people whose trust and confidence is in the public transport system. A car will be a relief if they can afford one. 

All three are first time car buyers with little experience in the showroom or garage. Their dilemma is the factors to consider before buying a car. Should it be new, big, small or just anything that can move them around? 

If you are considering buying a car like the four friends, here are a few points to consider. With so many options to choose from, find a vehicle that meets your needs, pocket and personal preferences requires research, time and careful consideration.

Determine your budget

Your money plays a key role in the vehicle you drive away from the showroom or the second hand garage. According to the Brands Manager of Honda Place, Mr Jaideep Puthran, the first thing to consider is how much you can afford.

“You can’t go the extra mile to buy what you cannot afford. Compute your salary, bonuses and other incomes before you decide to buy a car. You don’t want to spend so much on a car that you cannot even afford to maintain. Keep it simple and what your pocket can cope with.”

Consider the impact of the loan on your personal financial situation. If your personal financial situation is going to be stretched, that is, if you are on a fixed income which is already catering for other commitments, you need to review your budget.

Decide what type of car will best suit your work and lifestyle 

Your purpose determines your choice of car. Do you need a car for a long every day commuting, a minivan to fit the family or truck to haul work supplies? 

“Many first time buyers simply buy cars because they want something that can move them around. No, before you buy a car, think through it carefully. Why buy a pick up when you are an entry level person who works in the office? Leave that for entrepreneurs,” Mr Sam Arthur, an investment adviser said.

Mr Puthran shared in that assertion, saying “you need to identify a car that suits your needs. Almost everybody wants to drive a big car. Buying a car should be determined by what you want to use it for. If it’s for construction, you need a vehicle that best suit your industry.”

Low fuel consumption

Just as you cannot work on an empty stomach, your car would not move on an empty tank. With that in mind, you will need a fuel efficient car.

Mr Puthran advised that your car consumes as little as possible because “if your employer is even going to give you fuel, it is usually inadequate. Look for a car with 1.1 litre engine for instance but of course you can get any car you want. However, it is better to buy a car that will not inconvenience you because of fuel.”

Research the vehicles you’re interested in

It is easy to be sweet talked into buying a car that may be beyond your means or does not fit your need.  

The Internet is an enormous place to learn more about a car. Read reviews. Talk with friends and family to see which makes and models they recommend. 

New or old

While your pocket may determine what you buy, there is also the truism that “cheap things in the long run become expensive.”

Mr Puthran advised that a first time car buyer should buy a new car. 

“Don’t make the mistake of buying a used car. Rather, do the analysis. It is advisable that a first time buyer buys a new car. A used car may last for a year or two and then start giving you problems.”

According to him, most of the used cars on the roads in Ghana had not been tropicalised for Ghanaian roads and weather since they were mostly imported from the United States and Canada. 

But the reality is that it is not everyone who can afford a new vehicle. If you are buying a used one, have your mechanic do the job of a checking and checking it well. Have a test drive, using it in manner that fit your daily routine. 

Payment plan 

For entry level professionals who really need a car to be mobile, there are a few options open.

Check if your employer has a facility of a sort. If they do, it’s your lucky day. It is something you can consider because in most cases, the cost of the interest is much cheaper, if your employer is cushioning it.

You could also target jobs that come with cars as part of the string of benefits. In that case, you know your transportation is fully catered for.

What if your employer is not supporting you to get the car, nor does your job come with one but you have a consolidated salary that caters for everything?

Mr Bernard Otabil , the president and founder of the Financial Literacy Foundation, says, “just because you can afford a car does not mean you can drive a Range Rover because at the end of the day, remember the car comes with maintenance and depending on its engine, it will consume fuel and that adds to your budget.”

“The purchase of the car is just one component; the others are maintenance, fuel and other wear and tear that will take place.”

You can also consider an auto loan. 

 Auto loans and Insurance

There are two forms of insurance you should be concerned about when going for a bank loan. Some banks or financial institutions require that you take insurance on the loan to ensure some level of protection for the loan.

This insurance policy, Mr Otabil said, would give the bank some confidence that the facility will be paid back, should the unforeseen happen. 

The second insurance is the one on the car. You are required to insure the car but remember that in some cases, the bank will pay the first insurance for you to ensure that the car is insured.

But the problem is that the insured value is added to your principal which means that the insurance which you could have paid one off will now attract interest at a compounded rate.

The advice from Mr Otabil is, “make sure the first insurance payment is made by you. Do not allow the bank to do that. An insurance that could cost you just GH¢ 500 a year might accumulate interest up to GH¢ 1,500/GH¢ 2,000, depending on the interest rate.”

Ask the seller all the right questions.

Don’t walk into the showroom or garage as green as a toddler’s first day in school. Know what you want and put together a list of questions. Form the garage, learn more about how the car was maintained, any mechanical problems and reasons for selling. — GB