Buying or changing a car a big challenge for retirees
Many retirees find themselves faced with a big challenge when it comes to how they deal with their vehicles after retirement.
This is important because after you leave employment, you no longer qualify for secured loans and unsecured lending is the only financing you can use.
You should address the following questions extensively before you buy a car:
Do you really need a new car?
Consider whether your current car is in good enough condition for you to use for a long time, even up to 20 years. You can determine this using an average annual mileage estimate of 20 000km a year.
You can expect that if you retire at age 55, you will need to drive a car until you are 75 years plus of age.
This means your car must be capable of doing another 400 000km. If the car you currently drive has mileage of more than 100 000km, it may not be able to go for another 400 000km.
Can you afford a new car?
This is perhaps the most important question. You should realise that the cost of a car is not just the monthly instalment.
It includes cost of insurance, fuel, expensive servicing if the car is beyond its service plan, and annual licensing.
Carefully consider your budget, and ensure that the car you buy does not result in big monthly expenses.
Before you buy an expensive car, make sure you can cover your most important cost, which is medical scheme membership, because the older you get, the more medical help you need.
What type of vehicle do you need, and why?
Be realistic about the type of car you need. If you live in the city, you probably only need a sedan or hatchback car.
If you live on a farm, or in rural areas, you might need a utility vehicle, or a four-wheel drive that can navigate rough terrain.
Be guided more by the functionality of the vehicle rather than the supposed status it gives you.
Modern Toyota Corollas, Kias, Hyundais and VWs are trusted cars on SA's roads. They are durable, can travel over 200 000km and still be reliable if they are looked after, and now come with all the gadgets you may want.
Also, give some thought to the size of the engine as this talks directly to your budget.
How will you finance it?
One of the biggest abuses out there in the motor vehicle industry is the sale of cars with balloon payments, a huge lump sum that has to be paid to the financier after five years of owning the car.
It is questionable whether selling a car to a person in retirement on such a scheme is even legal.
As a buyer, you must protect yourself by choosing a good financing option.
As you can draw lump sums from your savings on retirement, it is possible to structure a finance deal that will not be onerous on your budget, and to buy you a car that will serve you well through your retirement lifetime.