Automotive Tips & Advice

When it comes to buying a car (new or used) in South Africa, there are no hard and fast rules about putting down a deposit. There are no regulations that state a buyer has to put down a deposit in order to make the purchase.


Buying a car in South Africa with a deposit | Auto Mart


When it comes to buying a car, the amount of money a buyer uses as a deposit is entirely up to them.


It is strongly advised by most people that when you want to buy a car, you try to put down some form of deposit. The general consensus is that when you buy a new car, you should try to put down a minimum deposit of 20%. If you are buying a used car, a 10% minimum deposit is advised.


What are the benefits of a deposit when buying a car

  • You will pay less interest: The more money you put down as a deposit for your new car, the less you will have to lend from the bank. This ultimately means that you will save more on the interest payments of your loan.
  • Faster loan approvals: Having cash to put down as a deposit definitely assists you to get your loan approval from the bank. Without a down payment, the bank has to lend the full amount to the buyer. Having a deposit also shows the bank that lending the balance of the purchase amount is less risky.
  • Lower monthly payments: putting down a deposit decreases the loan amount, which means that your monthly premiums will be lower because you are lending less money.

Buying a car in South Africa with a deposit | Auto Mart


Let's look at the difference a deposit will make to your monthly repayments, the total amount of interest paid on a car loan when financing a car over a 5-year period, and at an interest rate of 13%:

  • A buyer wanting to purchase a car for R300 000.00 without a deposit will end up paying the following:
    The financed amount is R300 000.00 and will cost the buyer R98 227.85 in interest. The total cost of the credit facility will be R403 161.35 and the buyer will have to pay monthly instalments of R7 465.95.
  • A buyer wanting to purchase a car for R300 000 with a 10% deposit will end up paying the following:
    The financed amount is R270 000.00 and will cost the buyer R88 444.44 in interest. The total cost of the credit facility will be R363 377.94 and the buyer will have to pay monthly instalments of R6 729.22.
  • A buyer wanting to purchase a car for R300 000 with a 20% deposit will end up paying the following:
    The financed amount is R240 000.00 and will cost the buyer R78 661.03 in interest. The total cost of the credit facility will be R323 594.53 and the buyer will have to pay monthly instalments of R5 992.49.

The above are simple examples to show how a deposit can drastically reduce the total finance cost of a new vehicle as well as your monthly instalments when purchasing a new car and applying for car finance. You don’t have to put down a deposit, but it definitely is in your best interest to try to put down a deposit.

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