Buying a new car is undoubtedly one of the most exciting purchases one can make and also one of the most daunting. Any new car owner will know the elation when driving away in your pride and joy – but it’s not all fun and games getting to the point of ownership.
Most people who opt to buy a new or good used car will probably need bank financing and that means that you will have to have qualified for vehicle finance criteria. You will have to have gone through the banks or vehicle finance companies affordability criteria and been cleared in terms of the NCA (National Credit Act). You will have needed to produce at least 3 months salary slips and 3 months bank statements and proof of residence and identity. And then there’s something else you will need – comprehensive car insurance for the vehicle being financed.
Did you know that banks can and will refuse your finance application if you do not have adequate car insurance cover?
It’s quite simple really – the banks are taking a huge risk by lending you money to purchase a car. The car is a moveable asset and the loan is a liability – which needs to be insured. Obviously the car carries all the risk, as you can’t have an accident in a loan (oh please let us know if you have ever), but for the sake of being understood, let’s just say that the value of the car needs to be insured. Right, onward!
What kind of car insurance cover do I need for vehicle finance?
Vehicle finance companies will insist that you take comprehensive car insurance cover. There are other, cheaper insurance options such as Third Party or Third Party Fire and Theft, but these do not adequately cover YOUR vehicle (the banks liability) in case of an accident or total write-off, in which case the car is a total loss. A total loss means that it cannot be repaired and has only a scrap value or is gone (stolen).
So what often happens is that loan applicants apply for vehicle finance and then take the insurance product offered, only to dump it a few months down the line. And do you know that there is nothing that the vehicle finance company can do about it. BUT – and this is very important: if this is your strategy, then you are heading for trouble. Reason being that if your car is stolen, damaged in an accident or written off – you will still have to pay the car finance installments. Most of us rely on a car to make a living, so having yours damaged or written off is going to place you in a very nasty financial situation. Imagine this situation:
You have a R200,000 car finance deal over 5 years. Your monthly repayments are R4,697.91 for 60 months and with 4 years to go your car is written off – without insurance! You therefore owe R225,499.68 for the remaining 48 months!!
It could financially cripple you for decades and make your life story read: “Ag, shame”. It’s just too risky – don’t take that chance. Maybe it’s not your fault but that’s not the question. The question is – can you afford to not have adequate cover? Accidents do happen – so just don’t take a chance by cancelling your car insurance on a financed car. OK, so here’s the best part. There is another way!
What Is The Cheapest Vehicle Finance Insurance Available?
The absolutely cheapest insurance cover for vehicle finance is called “Total Loss Cover” and it’s without a doubt the cheapest car insurance option that covers you against an accidental write-off and theft without recovery. This means that the banks loan is covered and will be paid off by the insurance policy. You therefore avoid possible financial disaster if the car is written off or stolen.
The Downsides Of Total Loss Cover
There are some downsides to Total Loss Cover – unlike Third Party – it does not have any liability cover – so if you hit another car and it’s your fault, you could be sued and held financially responsible for the costs. You are also not covered against damage incurred as a result of an accident. And unlike Third Party, Fire & Theft – you are not covered by fire and you are only covered if your car is stolen and not recovered. So a Total Loss Cover is really barebones cheap car insurance designed to protect the banks loan against a write-off and theft without recovery, also known as Total Loss.
How Do I Get SAU Total Loss Cover?
This kind of insurance product is usually only sold by brokers and you would be advised to find one from a referral from someone you trust or use the broker locator on the SAU website. You can get in contact with SAU who have a Total Loss product offering through their broker network.
So in closing, there really is no substitute for Comprehensive Car Insurance – but if you are struggling financially, then these policies might just be the helping hand you need to see you through to happier times.