IF YOU are in the market for a new car right now, think carefully about when you drive it off the dealer floor.
Glenn Stead, Standard Bank head of personal markets for vehicle and asset finance, says you can benefit if you have the self-discipline to leave the car at the dealership until January so that it can be registered as a 2013 model.
"The value of a vehicle starts to depreciate from the moment you drive it away. As the car must be registered in your name for you to do that, depreciation is calculated from the date of registration.
This means if you register the vehicle in January 2013 instead of December 2012, you gain a year’s worth of resale value. That’s a substantial gain.
"By registering the car in your own name in January, you will save yourself about 2% in depreciation value for the month of December."
However, Stead says the same isn’t true for a used car, as depreciation is calculated monthly from the date of registration by the original owner.
"When it comes to used cars, there may be a small advantage to be gained on the actual purchase price if you buy it now rather than next year, because dealers could choose to notch up the prices in January. But you gain no financial advantage from the date on which you register it."
Stead warns against buying any vehicle on a contract that promises several months’ payment holiday.
"Buying now but starting to pay only in, say, April or May next year, actually costs you a lot of money. Vehicle purchase contracts are specific payment plans. They are not loans. The payment period for a loan is usually flexible, and that affects the amount of interest paid. In a payment plan, however, the interest is calculated upfront on the full purchase price. It is then divided over the contract term.
"From the outset, you are liable for all the interest and the whole capital amount for the entire duration. A four-month payment holiday on a 60-month vehicle payment contract therefore simply means that the four months of capital and interest payments you skip are added back into the payment plan.
"Your repayments for the remaining 56 months of the contract therefore increase and instead of saving money, you end up paying more on a monthly basis."
But he says you can arrange with your vehicle asset financier to structure repayments in such a way that you can pay back in 11 months what you would have paid in a 12-month period of the contract.