Whether you bought a used one or a new one, chances are you had to finance the purchase with a loan. That basically means the car isn’t really yours. Until it is paid off, it is owned by the finance company, which can be a bank.
So while it might be tempting to turn on the tap and see what the performance package you paid extra for can really do, it’s really in your financial best interest to be on the road as safely as possible.
Dangerous turns ahead
Admittedly, that’s not always easy in South Africa. Between unforgiving potholes, robots affected by load shedding, and other motorists forgetting the rules of the road when a drop of rain falls, it can feel dangerous even to the most experienced motorist.
Of course you can rest assured that your car is fully insured. What you may not realize (or have in mind) is exactly what happens if you have a serious accident or your car is stolen, even if you have insurance.
“For example, if your car is debited, the bank pays what is left on the vehicle,” says Christiaan Steyn, head of MiWay Blink.
“If you financed the car with a large balloon payment or on a very long-term basis, the amount you owe the bank may be greater than the insured value of the vehicle. That can put you in a much worse position when it comes to buying a replacement vehicle, as not only will you be left without a deposit to put on a new vehicle, but you will still have to settle the outstanding amount on the old vehicle first. .
The same applies to theft of a car, although you must then open a criminal case, which must then be reported to the insurer.
Fortunately, as Steyn points out, drivers can go a long way to avoid those scenarios.
“Making sure your car is parked in a safe place at night and when you’re at work is something you have control over,” he explains.
“Also, be aware of your driving style and of the speed limits. Driving carefully and respecting others on the road reduces the risk of an accident.
“It is also advisable to have shortfall cover with your hull insurance. Credit shortfall covers the difference between the insured value and the amount still owed to the finance company when a vehicle is written off or stolen.
“A car is the second most expensive purchase most of us will make, after a house.
“As exciting as driving off in a new vehicle may be, drivers must remember that it is also a big responsibility. By taking the right precautions, they not only make themselves less vulnerable to accidents and theft, but can also put themselves in a much better financial position should the worst ever happen.”
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