Whether you bought a used or new vehicle, chances are you had to finance its purchase with a loan. In effect, this means that the car is not really yours. Until it is repaid, it belongs to the finance company, which may be a bank.
So while it might be tempting to turn on the taps and see what the performance package you paid extra for can really do, it’s really in your own financial interest to be as safe as possible on the road.
Dangerous turns ahead
Admittedly, it is not always easy in South Africa. Between unforgiving potholes, robots affected by load shedding, and other drivers who forget the rules of the road as soon as it rains, things can seem perilous for even the most experienced drivers.
Of course, you can be reassured by the fact that your vehicle is fully insured. What you may not realize (or have put in the back of your mind) is exactly what happens if you are in a serious accident or your car is stolen, even if you are assured.
“If your car is deregistered, for example, the bank will be paid whatever is still owed on the vehicle,” explains Christiaan Steyn, head of MiWay Blink.
“If you financed the car with a large or very long-term lump sum payment, the amount owed to the bank could be more than the insured value of the vehicle. This can leave you in a much worse situation when it comes to financing. purchase a replacement vehicle, because not only do you end up without a down payment on a new vehicle, but you still have to pay the outstanding amount on the old vehicle first.
The same applies in the case of car theft, but you will have to open a criminal file, which will then have to be reported to the insurer.
Prevention helps
Fortunately, as Steyn points out, drivers can do a lot to avoid these scenarios.
“Making sure your car is parked in a safe place at night and when you’re at work is something you can control,” he explains.
“Also, be aware of your driving style and speed limits. If you drive carefully and respect others on the road, there is less chance of causing an accident.
“It is also advisable to have credit shortage cover in place with your P&C auto insurance. Credit shortage covers the difference between the insured value and the amount still owed to the finance house when a vehicle is written off or Fly.
“A car is the second most expensive purchase most of us will make after a house.
“As exciting as starting out in a new vehicle can be, drivers need to remember that it’s also a big responsibility. By taking the right precautions, they not only make themselves less vulnerable to accidents and theft, but they can also put themselves in a much better financial position should the worst happen.
Source: Irvinepartners
