Car loan mistakes Kenyans should avoid

0


The process of obtaining a car loan seems a little complicated for the majority of people especially those who are first-time buyers.

This has led most motorists to make mistakes which often cause them to incur more costs in order to resolve emerging issues.

Miller Kyalo, automotive expert and automotive engineer, spoke with Kenyans.co.ke and broke down the costly mistakes that many Kenyans make without realizing it.

A mechanic working on a car in a garage

To file

Choosing the wrong loan term

According to Kyalo, this is one of the most common mistakes people tend to make when buying a car with a loan.

It implied that the majority of people would choose a longer term with a lower monthly rate in order to pay less on a monthly basis. However, Kyalo rejected the theory, pointing out that motorists end up paying more in terms of accrued interest.

The auto guru has indicated that the best deal is to consider his EMI (Equated Monthly Payment) – paying the amount in the shortest time the motorist is comfortable with. He urged motorists to consider their affordability.

Secure the vehicle for a loan

“A big problem is when the vehicle is tied to the loan. For example, if you go to a sales yard in Mombasa or Nairobi and they give you a deposit, then you will make monthly payments.

“Although this is the most common, there is no chance of renegotiating the deal if you don’t pay the monthly price – this ultimately leads to hefty penalties as well as the possibility for car dealers to reclaim the deal. car.

Kyalo advised to go for a Sacco loan, which he said is preferable due to the lower risks involved. The car expert gave the example of his former colleague who had to pay penalties of up to Ksh 10,000 for not having made the payment on the 5th of each month.

“I have seen most people enter the taxi business with this risk and it ends up costing them dearly,” he said.

Neglecting other financing options

A spot check on major car dealerships and exhibition grounds would see dozens of Kenyans flocking to see different varieties of vehicles.

According to Kyalo, the biggest mistake car buyers make, especially when purchasing their first vehicle, is choosing the first car loans they find. He discouraged this, noting that neglecting the financing options of other car dealerships could be damaging to his finances.

Kyalo indicated that instead of jumping on the first option offered, it is essential to do your due diligence by comparing the advantages, 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 margins.

A pre-approved loan is advantageous for a motorist because it gives the motorist an advantage in negotiating the price and financing when choosing the loan. It is a sign of commitment to buy the car.

Kenyan currency banknotes.

Kenyan currency banknotes.

To file

Commitment to a loan without stable income

With the current economic conditions, the cost of living has reached an all time high. Therefore, when choosing a loan option, it is essential to take into account the constant income stream that one gets on a monthly basis to ensure that he would be able to pay off the amount in full without mistake.

“If you know that you are a small businessman and that you do not have a stable source of income, do not take a loan.”

He advised Kenyans to forgo the plans if they are unable to repay the loan at that time.

Kyalo hinted that those looking to buy their first vehicle should go for a car that is low-maintenance, repairable, and has spare parts readily available.

He joked that no one would want to continue paying for a car that is still in the garage due to maintenance issues.

“When you start out, go for a regular car. If you are financially stable, I suggest you go for high-end vehicles,” Kyalo said.

Used car fleet.

A fleet of used cars.

To file


Share.

About Author

Comments are closed.