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Advice on buying a car

Buying a new motor vehicle may be the 'big reward' for all that hard work. But the lust for status and that feeling of well-being, costly in itself, may also resolve into the 'big headache'.

The last year has seen an unprecedented increase in retail car sales, accompanied by a similar growth in used cars. If you are patient enough, the first move before buying a new car is to see what is being traded in and why. Talk to motor dealers and used car salesmen. They might talk to their own book, but you soon gather a realistic picture if you talk to as many as you can.

Then find out the cost of spare parts. If it is a well established model, it may also be worth finding out what is normally replaced or repaired. Scrap yard merchants who deal in recycled parts can also provide insight into what goes wrong: if it is difficult to get hold of a particular window mechanism or steering rack chances are that's what often goes wrong with that particular model.

If you set your sights on a particular model, find out the cost of new replacement parts.

In reality, of course, few people will want to follow this advice. After all, you only have to look at all the advertisements to realise that buying a car is a very strong emotional versus image thing. And quite a few of the risks can be covered by insurance. Yet, as Santam points out, the insurance implications are often lost amongst the more exciting decisions like the make and model, price and resale value, financing decisions and servicing costs.

Steffen Gilbert, the company's chief executive, says, "Few people find out beforehand what impact their decision will have on their motor insurance costs - often to their financial detriment."

Despite one's impatience and excitement, car buyers should really begin arranging motor insurance cover before making that final decision. Certain vehicles of the same value may carry higher insurance premiums. Even one colour might be more expensive (ie red). Insurance companies work on statistics. They see which vehicles are stolen or hijacked more often, and where the frequency of accidents is most common. Cost of repairs and replacement parts may also determine the premium. By finding this out first, may help you make a more objective sensible decision.

For example, perhaps avoid the 'exotics' or, what one friend called. 'fringe cars'. They might be French or Italian, and because not many are sold, many of the replacement parts are imported. That often means only one supplier and therefore no competition on prices.

Also consider the strength and extent of the support chain nationwide. Are there sufficient of that particular model on the road so there are plenty of technicians and experts around capable of understanding the electronics.

All these and many other factors filter through to the costs of insurance. Finding what your premium might be is therefore a good indicator of your possible future costs.

He says that it is equally important that you insure your vehicle for the correct value and that you revise the amount annually. Underinsurance could cost you dearly, while over insurance means you pay unnecessarily high premiums.

"Also find out on what basis your insurer calculates the value of your claim in the event of a total write-off or theft. And if you have a hire-purchase agreement, the amount still owed to the bank or financing institution could set you back badly.

"Decide in time whether you want to insure only the market value of the vehicle, or the amount outstanding in terms of the hire-purchase contract as well. If your vehicle has to be written off within the first year of the agreement you could suffer a severe financial blow thanks to the declining market value from a new car to a used car, coupled with the high amount still outstanding on the loan.

"And, do not forget that when a vehicle is written off or stolen the insurance payout is made directly to the financing institution. The difference that is still outstanding remains the client's responsibility if it is not covered by the policy.

"It is a major problem when your car is stolen or badly damaged that you don't have wheels in the interim. The 'car hire' insurance option provides a car in that time of need and it's quite cheap."

Gilbert notes that in South Africa motor vehicle premiums aren't cheap because of the high incidence of accidents, theft and hi-jacking, as well as the cost of spare parts that has caused repair costs to escalate.

Gilbert adds that motorists do not make enough use of the discounts to be gained from taking a voluntary excess.

"Vehicle insurance in general requires that the policyholder pay an excess in the event of a claim. However, policyholders can choose to increase this amount and earn a discount on premiums in the process.

"No-claim bonuses can also bring about a significant saving in premiums. Make certain that your insurer keeps a record of your no-claim bonuses and that your premium reflects these."

Due to ongoing incidents of theft and hijacking more and more insurers require security devices that meet certain requirements. "In some areas this could translate into a discount on your premium, but in others it could be a minimum requirement before you get any cover whatsoever."

"Besides your home your vehicle is probably your most expensive possession.

Therefore, make sure that you have the best insurance that you can afford.

"Discuss your choice of vehicle with your broker and/or insurer. They can give you advice irrespective of whether the vehicle will be used for private or business purposes."

For more information call Santam on 0860 122 747.