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With slow economic growth and further expected increases in interest rates, even the South African Reserve Bank has cautioned consumers that it's not be a good time to incur more debt.
Watson said: "The reality is that unless you are in the one percentile of the population who rarely need to worry about budgeting or financial planning, then all the warning signs are there that now is a time to start being more attentive of your spending habits, if you’re not already."
CONSIDER ALL OPTIONS
If you are in the market for a new car, considering the volatility in the economy, then now is a great time to examine all possible financing options and deals available in the market. Watson said: "For instance, the option of leasing may not have crossed your mind before, but it actually should be factored in your decision making process because it is a very flexible, affordable and viable option.
"To provoke your thought process, here I’ve outlined some key considerations and comparisons between ‘buying’ and leasing a car, for your interest."
WHAT HAPPENS WHEN YOU BUY A CAR?
Watson said: "Did you know that when you finance through a bank on an instalment contract, you don’t really own it? The fact is the bank remains the title holder and the title is only transferred to you when you’ve paid the last instalment at the end of the contract.
"Also, if you are considering buying a car with a balloon payment plan, keep in mind that you will have to pay this back to the bank as well and, if you aren’t able to pay this amount over in one large sum, you may have to re-finance it with the bank – and this will cost you even more in interest."
Over-and-above your monthly installment cost, buyers need to factor in expenses such as insurance, tyres, service and maintenance, roadside assistance and even a tracking unit. Once you've totalled these you will have an accurate full cost of ownership.
Watson adds: "Then, as if you weren’t paying enough each month, the value of your car will also depreciate or decrease over time and with use. In fact, the value or market resale value on some models can be less than 40% of the purchase price at the end of a five-year installment contract period."
WHY LEASE A CAR?
By leasing a car, you can choose to drive a car that suites your needs, with more flexibility by performing an early trade in every three-to-four years as your needs and lifestyle changes.
Watson said: "As if that isn’t simple enough, you also don’t have to worry about the unexpected costs, risks, and uncertainties associated with ‘owning’ a car, including; insurance, service plan, tracking units, road side assistance and accident management. These are all included – and you only need to make one monthly payment, where the price is fixed for the full term of the lease.
"Additionally, if at the end of the lease contract term you want to keep the car, you can choose to buy it and finance it through the leasing company. Since you’ve already been through the credit checking and approvals process, there are no hassles – and you can make an offer in line with what the market resale value on the vehicle would be, which also means that you don’t take on the depreciation risk.
"There’s no denying that the prospect of getting a new car is an exciting one, though a smart consumer is one who takes the time to do proper market research and these are just some of the facts you should be comparing between ‘buying’ and leasing to help you make a more informed decision at the end of the day."
