Five tips for responsible vehicle ownership and maintenance
My Money Matters | Written by Absa Staff Writer
Owning a vehicle comes with certain considerations and responsibilities, such as maintenance, services and insurance. In this article, which forms part of our Street Smart series, we provide vehicle owners with important tips to consider.
Insurance and shortfall cover
Find a good, comprehensive insurance provider and make sure that your car is sufficiently covered. Insurers will give you the option to either insure your vehicle at market or retail value. Know the difference and choose what is most suitable.
Market value: The value of your car based on its condition, such as mileage and age, plus the retail value.
Retail value: The average price that your vehicle can be sold for.
Comprehensive insurance provides cover for accidental damage or loss, with some policies providing additional value-adds, such as emergency roadside assistance, cover for hail damage, window shield and glass repairs and damage in cases of strikes. There are several exclusions that are then indicated in the policy schedule, such as the wear and tear of vehicle components.
The difference between your car value and the remaining outstanding finance amount, including the balloon amount, may cause a shortfall if you are involved in an accident before you reach the break-even position. Credit shortfall cover does not usually form part of the comprehensive insurance product, although it does in some cases. Credit shortfall cover insures the difference between the value of the vehicle and the outstanding amount owed to the bank. Other factors resulting in further shortfalls include exorbitant excess amounts or rejected claims due to an unintentional violation of the terms and conditions.
It is advisable to shop around, find an insurance policy that works for you and understand your policy schedule. Most insurers provide a reasonable discount when household contents are included in the policy. One can take advantage of this added benefit.
Service and maintenance
This should be done regularly at accredited dealers or workshops. You may have heard this before and it cannot be stressed enough – regular servicing of the car is crucial. This will help avoid unnecessary damage, which will cost you dearly and cause a situation where you end up out of pocket. "A reputable dealership or professional accredited workshop should be used to service your vehicle, to give you a sense of security and available channels when you want to return the vehicle in the event that you are dissatisfied with the quality of the work that was carried out," says Sbu Dlamini, Head of Compliance at Absa Vehicle and Asset Finance.
A typical service includes an oil change, filter changes, checking all components of the car, etc. Service intervals differ and either a major or basic service will be completed, depending on the mileage. “Servicing at a manufacturer-approved service centre or dealer will also give you the assurance that your warranty will not be cancelled and guarantees you quality service,” Dlamini adds.
The maintenance plan that can be bought separately will cover the wear and tear of specific components in the car. Instead of paying cash for all these items or finding the money to replace worn components, this plan proves to be very useful. An accredited service centre or dealer will ensure that the replacement parts are up to the manufacturer’s standard, as their quality is often guaranteed.
Accidents and repairs
Choosing a good insurance provider will give you access to a wide network of trusted repairers that will most likely honour your vehicle’s manufacturer warranty. It reduces the burden of having to find a trustworthy mechanic yourself, and you’re guaranteed to get repairs done at a high standard, or you may return the vehicle if you’re not satisfied with the repair work completed.
Your tyres play a crucial role in your safety. Using worn-out tyres may decrease your car’s ability to avoid accidents, and your insurance claims may be rejected if your tyres are worn out or in poor condition. Rotating your tyres, attending to problems quickly and replacing them will save you money in the long run.
Lastly, ask your repairer whether they are using new parts that are made to the manufacturer’s specifications. Restored parts or salvaged parts may not be as reliable.
Credit life cover
Life may surprise you and comes with its own uncertainties. Buying credit life cover for your debt obligations will ensure that the outstanding balance is paid off in unfortunate events. The policy covers the principal debt and the premium is in proportion to the latest up-to-date balance of the loan.
Cover can be provided for loss of income, dread disease and death. The full outstanding debt, excluding arrears and interest on arrears, will be paid if a claim is accepted by the insurer. Some exclusions may apply, as stated in the policy wording. Cover typically stops once the outstanding balance has been paid or when premiums are defaulted.
Repayment of loans and arrangements with finance providers if your financial position changes
Customers have faced numerous hardships over the years, and some have consistently shown signs of continued hardship that affects their finances. Making a more informed decision during periods when finances are worse than planned can lighten the burden. Financial relief was made available during the tougher period of 2020, and there remains concern about whether customers will be able to manage their financial obligations. This extends to vehicle finance as well. One needs to know the channels available to get help and the options available.
Taking a proactive approach is always better than falling behind with your repayments. Speak to your bank to inform them of the changes that affect your ability to repay the loan. Repossession of the vehicle may not absolve you of all the debt, as the bank will sell the repossessed car in order to recoup the outstanding balance, but there could be a shortfall for which you will be liable. Another point to consider is the impact on your financial record and how it can affect your future prospects.
If regular repayments are not possible, communicate with the bank or lender and make alternative arrangements. Consider selling your car yourself through a reputable dealer or through a private sale. Surrendering your vehicle is also an option, however, it will also have an effect on your credit score.
Explore all the options available to you and don’t be shy to engage your bank or insurer if you're in doubt.
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Disclaimer: The advice contained on this blog is for general purposes only and does not take into account individual circumstances, objectives or financial needs. Accordingly, readers are advised to seek appropriate advice from licensed professionals prior to making any investment, or taking up a financial product or service.
