The process of getting a car loan seems a bit complicated for the majority of people especially those who are first-time buyers.
This has led to most motorists making mistakes that often lead to them incurring more costs in order to fix the emerging issues.
Miller Kyalo, a car expert and automotive engineer, spoke to Kenyans.co.ke and broke down the costly mistakes that many Kenyans make without realising it.
Choosing the wrong loan term
According to Kyalo, this is one of the most common mistakes that people tend to make when purchasing a car through a loan.
He entailed that the majority of people choose a longer-term with a lower monthly rate in order to pay less on a monthly basis. However, Kyalo dismissed the theory, pointing out that motorists end up paying more in terms of accrued interest.
The car guru advised that the best terms are to consider one's EMI (Equated Monthly Installment)-paying the amount in the shortest time that the motorist is comfortable with. He urged motorists to consider their financial capability.
Attaching the vehicle for a loan
"A big problem is when the vehicle is attached to the loan. For instance, if you go to a sales yard in Mombasa or Nairobi and they give you a deposit and then you'll be remitting in monthly instalments.
"Although it's the most common, there are no chances of renegotiating the deal incase you fail to pay the monthly price- this eventually leads to hefty penalties as well as the possibility of the car dealers reclaiming the car.
Kyalo advised on opting for a Sacco loan, which, according to him, is preferable due to the lower risks involved. The car expert gave an example of his former colleague who had to pay penalties as high as Ksh10,000 for not remitting payment on the 5th date of every month.
"I've seen most people venture into the taxi business with this risk and it ends up costing them," he stated.
Neglecting other financing options
A spot check on major car dealers and showgrounds would see scores of Kenyans pouring in to view different varieties of vehicles.
According to Kyalo, the major mistake car buyers do especially when purchasing their first vehicle is picking the first car loans they find. He discouraged this, pointing out that neglecting financing options from other car dealerships could be a detriment to one's finances.
Kyalo advised that instead of jumping at the first option one gets, it's essential to do their due diligence by comparing the benefits, features and interest rates of different loans.
He added that great offers could help a motorist get pre-approved loans with competitive rates and low markups.
A pre-approved loan is beneficial to a motorist as it gives the motorist an upper hand in negotiating the price and financing when choosing the loan. It's a sign of commitment to purchasing the car.
Commitment to a loan without a stable income
With the current economic times, the cost of living has been at an all-time high. Hence, when choosing a loan option, it's vital to consider the steady flow of income one gets on a monthly basis to ensure that they would be able to fully pay the amount without fail.
"If you know you're a small businessman, and you don't have a stable source of income, don't commit to a loan."
He advised Kenyans to forego the plans if they are not able to service the loan at the time.
Kyalo entailed that those seeking to purchase their first vehicle should opt for a low-maintenance car that is serviceable and whose spare parts are easily available.
He joked around stating that no one would wish to continue paying for a car that is always at the garage due to maintenance issues.
"When you're starting go for a common car. If you're financially stable, I would suggest you go for the high-end vehicles," Kyalo stated.
