Wednesday, September 26, 2007

AA Autobay - new service for sellers and buyers

The Automobile Association has launched AA Autobay, a web-based site through which people can buy, sell, finance and insure pre-owned vehicles privately.

Buyers can log on to aautobay.co.za to search for used vehicles, make an offer to purchase and apply for finance and insurance online.

AA Autobay's Ed Gassner says the service lets private buyers and sellers deal in a safe, hassle-free and cost-effective environment.

"Until now there has been no real way of selling or financing a pre-owned vehicle privately," he said. "Even if you could find a buyer, the banks were reluctant to finance it."

Sellers must take their vehicle for a quality check (R379) at a participating AA Test & Drive centre before it can be listed. AA Autobay will also ensure that the vehicles are not stolen, previously written off or rebuilt.

A comprehensive report will be produced and, if the vehicle meets minimum criteria, it will be photographed and put on the site.

AA Autobay will arrange a test drive and, once a price has been agreed, arrange payment and the transfer. Both buyer and sell pay a two percent fee to AA Autobay and the service is available to non-AA members as well.

Go take a look.

From:

Friday, September 21, 2007

What Parents of Teenagers Can Do?

When parents understand the risk factors involved in letting 18-year-olds get behind the wheel,
they can act to improve the situation for their own children.

Don't rely solely on driver education.
Driver education / driving schools may be the most convenient way to learn driving skills, but it
doesn't always produce safer drivers. Parents also should set good examples when they drive
while reinforcing the lessons their teens learned in driver education / driving schools.

Restrict night driving.
Most nighttime fatal crashes among young drivers occur between 9 p.m. and midnight, so you
can reduce their risk of a crash by restricting nighttime driving after 9 p.m. The problem isn't just that late-night driving requires more skill. Outings late at night tend to be recreational. In these circumstances, even teens who usually follow all the rules can easily be distracted or encouraged to take risks.

Restrict passengers.
Teen passengers in a vehicle can distract a beginning driver and/or lead to greater risk-taking.
Because young drivers often transport their friends, there's a teen passenger problem as well as
a teen driver problem. In 2003, 59 percent of teenage passenger deaths occurrred in vehicles
driven by another teenager. While night driving with passengers is particularly lethal, many fatal
crashes with teen passengers occur during the day. The best policy is to restrict teen passengers,
especially multiple teens, all the time.

Supervise practice driving.
Take an active role in helping your teenager learn how to drive. Plan a series of practice sessions
in a wide variety of situations, including night driving. Give beginners time to work up to
challenges like driving in heavy traffic or on the freeway. Supervised practice should be spread
over at least six months and continue even after a teenager graduates from a learner's permit to
a restricted or full license.

Remember you are a role model.
New drivers learn a lot by example, so practice safe driving. Teens who have crashes and
violations often have parents with poor driving records.

Require safety belt use.
Don't assume that seat belt use when you're in the car with your 18-year-old means belts will be
used all the time, especially when your child is out with peers. Remember that belt use is lower
among teenagers than older people. Insist on belts all the time.

Prohibit driving after drinking.
Make it clear that it's illegal and highly dangerous for a teenager to drive after drinking alcohol or using any other drug. While alcohol isn't a factor in most crashes of 18-year-old drivers, even
small amounts of alcohol will impair teens.

Choose vehicles for safety, not image.
Teenagers should drive vehicles that reduce their chances of a crash and offer protection in case
they do crash. For example, small cars don't offer the best protection in a crash. Avoid cars with
performance images that might encourage speeding. Also, be mindful that certain vehicles with a
higher center of gravity may be more prone to roll over.

Wednesday, September 19, 2007

Avoid the pitfalls of buying a first car

The dream of every teenager is to get wheels - but the wrong wheels can tie you down as surely as having your feet nailed to the ground.

The biggest mistakes people make in buying motor vehicles are:

  • They buy the biggest and the best, saddling themselves with high debt.
  • They buy a new car when they could save considerably buying a good second hand model.
  • They replace their vehicles too quickly; most cars will last about eight years.
  • They choose the wrong form of finance, with high interest rates and other add-on costs
  • They buy uneconomical vehicles with high running costs and expensive spare parts.
  • They forget the more costly or more sporty a vehicle, the more they will pay in insurance.
  • They add expensive accessories.

There are 10 steps to follow when buying a motor vehicle:

Step One: How much?
Work out how much you can afford to spend, including the running costs of the vehicle.

Step Two: Financing
If you are under 21, the banks will not allow you to borrow money without support and agreement from your parents. They are also reluctant to lend money for a car more than five years old.

Vehicle financing plans include:

Hire purchase: A hire purchase, or HP, agreement is a loan, mainly from a bank but also increasingly from vehicle manufacturers and big dealers

Basically:

  • You are leasing (hiring) the vehicle until you have repaid the loan.
  • If you stop paying the lender is entitled to reclaim the vehicle.
  • You need a deposit of at least 20 percent.
  • The maximum repayment period is 54 months.

Lease: A lease arrangements is different from hire purchase in that you are actually only hiring the vehicle.

  • Leasing is suitable for businesses and people with car allowances because you can claim some of the cost against business mileage.
  • No deposit is required.
  • The maximum lease period is five years.
  • You can buy the vehicle at the end of the lease period expires by paying what is called "residual value".

Residual payment works like this:

  • You leave an unpaid sum, called a residual or balloon payment, until the end of the contract period. Over five years it's anything between 20 and 35 percent of the new cost.
  • In theory, the residual payment should be equal to the re-sale value so you can sell the vehicle at the end of the contract and owe nothing.
  • Leasing is more expensive than hire purchase: a R200 000 vehicle at an interest rate of 15.5 percent over 60 months would cost you almost R14 000 more to lease and then pay the residual, than to buy with HP financing.
  • The market value of the vehicle could be less than the residual value at the end of the contract if the vehicle is in poor condition.
  • As a rule of thumb you can expect your vehicle to depreciate by 1% a month for the duration of your contract. If your contract term is 60 months, your car will depreciate by 60% over the period. This means you should not have a greater than 40% residual.
  • You can opt for a buy-back contract with a motor dealer, who guarantees to buy back your vehicle for a certain value after a set time - provided you have not done more than a specified number of kilometres.
  • You must make sure any insurance covers the entire value of your motor vehicle, including the residual payment.

Step Three: New or second-hand
Whether you can afford a new car depends on how much money you have; there's nothing wrong with a second hand as long as you check it out properly.

Step Four: Choosing your car
If you're buying a new car advance to Step Eight. If you are buying a second hand car go to Step Five.

Step Five: A second hand car
Get a book called the Auto Dealer's Digest, which prices all second cars. There is an upper price - at which the second hand car dealers normally sell a second hand car - and a lower price at which they buy them.

You can buy second-hand cars privately from someone else or through a second hand dealer. You'll probably get a better price in a private sale, but a sale through a dealer usually comes with some guarantee on the motor vehicle itself.

If you buy from a dealer make sure he's a member of the Retail Motor Industry, so if you have a complaint you can appeal to the Motor Industry Adjudicator.

Step Six: Final checks
Here are a few precautions to take before buying a second hand car:

  • Don't pay anything until you are happy with the car.
  • Check the service record book to ensure it's serviced regularly.
  • The Automobile Association (AA) will give the car a thorough check over for a fee.
  • Insist the current owner puts the car through the road worthiness check. You can't get the car licensed in your name without a Certificate of Roadworthiness (CoR).
  • When test driving a car take it out on the freeway and see what happens at speed. Keep going for about half-an-hour so you can see if any odd noises develop or the engine starts overheating.

Give away signs of poor condition include puffs of smoke from the exhaust when the car starts, or when you change gear. Also look out for a rough feeling to the gears; a grey colour to the oil, and any jerkiness when the motor is running.

Wait a while after parking, then check under the car for oil and water leaks.

  • Check the odometer. The lower the kilometres done the better; you can expect a distance of about 20 000km a year.Check the body for rust and previous collisions. Give-aways are slightly different colours on different parts, and body filler. To check for body filler, use a magnet on the body. Where it doesn't stick is a sure sign of body filler.

Rust shows up on window edges (look under the rubber), behind boot and door panels and at joints.

  • Check you are not buying a "Code Three" vehicle – a car that's been scrapped and rebuilt.

Step Seven: Stolen vehicles
If you buy a stolen car and it is tracked down to you, the police will take it away from you and you will lose your money. To prevent being caught out:

  • Ensure the ID book of a private seller tallies with the name and address of the registered owner.
  • Check the engine and chassis numbers on the vehicle against the registration documents.
  • If you have any doubt, check with the police or your local traffic department. They can access the National Traffic Information System (Natis), an online database that records ownership details of all registered vehicles. You can also call AA Autocheck on 0861 601 601.
  • Make sure no money is owed on the car - check with the institution that financed the previous loan.
  • Never pay for any vehicle in cash. Pay with a bank guaranteed cheque or a personal cheque made out to the seller.

Step Eight. Taking ownership
Get the car registered in your name as quickly as possible. You can get the necessary papers, which must be signed by the current owner and yourself, from the motor vehicle licensing department.

Step Nine: Guarantees and maintenance contracts
Carefully check what is guaranteed and what is not guaranteed. Maintenance contracts are sold by dealers to cover the on-going costs of maintaining your vehicle.

Step Ten: Insurance
It's important you have the car insured before you drive it out of the garage - you could have an accident on the first corner bend. You can get three types of insurance:

  • Comprehensive insurance means your car, and anything or anyone else, is covered against any accident.
  • Third party, fire and theft is really there for older second hand cars. Your car is insured if it is stolen or catches fire, and if you damage someone else's property or injure someone else. Damage to your vehicle is not covered.
  • Third Party Motor Vehicle Assurance is compulsory assurance that you pay without even knowing it every time you buy petrol; it covers anyone injured in an accident.

If you're under 25 you'll have high insurance premiums and a higher than normal excess; excess is the first part of a claim you pay if you have an accident.

Four tips on motor car insurance:
  • Get the lowest premiums. Shop around by getting quotations from a number of insurance companies.
  • Make sure that the value of the car is reduced every year when you renew your insurance.
  • The cost of insurance will come down if you pay a higher excess; take into account how much you can afford to pay yourself.
  • If you do not make an insurance claim you will build up a no claim bonus, which reduces your insurance premiums.

From:

Thursday, September 13, 2007

How to Avoid Conflict on the Road

  • Keep calm, show restraint: Every car journey brings a risk of frustration and conflict. Before you set off, be determined not to succumb to it.
  • They're not out to get you: Most aggravating moves by other drivers are unintentional.We all make mistakes. Don't show your frustration by making gestures. They may mean nothing to you but could be the last straw for others.
  • Don't compete or retaliate: If someone's driving annoys you, don't try to "educate" him or her. Leave traffic policing to the police and driving instruction to professionals.
  • Be patient in traffic: Don't push into traffic queues. If you wait and clearly signal what you want to do, other drivers will usually let you in. They don't like being forced to do so.
  • Set an example to others: Give way at busy junctions or where traffic lanes merge; it won't delay your journey by much. Wherever there's merging traffic, follow the rule "let one in and go".
  • Say thanks: Courtesy encourages co-operative, safe use of the road.
  • Say sorry: Apologising to the other driver when you make a mistake reduces confrontation and helps to defuse anger.
Violent motoring-related incidents such as road rage are rare. But it is important to know what to do if you feel threatened by another driver.

  • Try not to react: Avoid making eye contact, which may be seen as confrontational.
  • Don't respond by accelerating, braking or swerving suddenly: The other driver may think that you are looking for an argument, and you could lose control of the car.
  • If you think you are being followed: Try to drive to a busy public place or a police station before you stop. If you're on a motorway, mingle with other vehicles.
  • Don't leave the motorway for unfamiliar roads.
  • Keep the car doors and boot locked: Also keep the windows and sunroof only partly open in urban areas.
  • Physical threats: Stay in your car and lock the doors. If you have one, call for help on your mobile phone, and use the car's horn and lights to attract attention.
  • Never carry any kind of defensive weapon: It could simply provoke a potential assailant.

Wednesday, September 5, 2007

A new car: your worst investment

YOUR car is going down in value by thousands a month!

The chances are good that it dropped by 20% as you drove it off the showroom floor!

A car is the second biggest outlay most people make. It is a consumer durable, not an investment – but because it can impoverish over the long term, it could be called the worst investment.

Depreciation is the dirty word that the motor industry and the media seldom mention.

The table plots the one, two and three-year depreciation of a random sample of 23 cars. They range in price from the Nissan 1 400 at R70 000 to the Porsche Cayenne at R1,4m. The table compares the prices of these vehicles when they were new to their present trade-in value.

The worst example, the Jeep Cherokee Laredo V8 plummeted 38% in value from R382 000 to R237 500 in a year. That was R12 000 per month.

The best, ironically, the Porsche Cayenne, fell by only 11,9%. It doesn’t sound like much in percentage terms but in rands the drop was R175 000 – R14 500 a month!

One third of the sample depreciated by more than 30% in the first year. Less than a third fell in value by less than 20%.

The depreciation over two and three years is shown in columns three and six. It is, expressed in percentage decline per annum. The table shows that depreciation in years two and three starts to level off. Many cars these days can last 20 years.

This sample represents less than 10% of the cars available on the SA market. One cannot make judgments about any particular brand - but it does confirm that depreciation, though often unseen, makes fuel costs look trivial.

According to the latest vehicle statistics released by the National Association of Automobile Manufacturers of South Africa (NAAMSA), more than 200 000 new cars have been sold since January.

Tony Twine, director and senior economist at Econometrix, describes the life cycle of a car: “During the first year, the value of the car decreases at a steep rate. For the next four years, the car depreciates at a more gentle, slower pace, with a further step down in value in the sixth year. Beyond this, the value of the rate of depreciation flattens out.”

Borrowing money to purchase a depreciating asset is the worst “investment” you can make. Sages say: “Buy things that appreciate and pay for the use of the things that depreciate.”

“A car is not an investment; you use it and then discard it”, says Piet Viljoen of Regarding Capital Management (RE:CM).

He says the definition of an investment is a security of principal, with the potential of growth and this does not apply to a car, explains Viljoen.

“Each person will do what they want to maximise their own value or utility”, says Viljoen.

A new car usually involves allocating a large amount of money into a diminishing asset.

Opportunity cost must be taken into account. Deciding to buy a luxury model now can detract significantly from one’s wealth in later life.

“If a person prefers to buy a fancy car as opposed to investing a portion, they must realise they will fall behind in the wealth accumulation stakes”, adds Viljoen.

People should think more carefully about the objectives of having a car, reckons Twine.

“They are swept along by the emotion of a brand new car and don’t take into account what the car is going to be used for,” warns Twine.

Twine advises leasing if the car is to be used purely as a means of transport. “This will decrease the costs of owning the use of a car, rather than the vehicle itself”.

Up to now, leasing has been restricted to companies and professionals who use their vehicles to generate income. The new Consumer Credit Bill, which is likely to come into effect in 2007, will allow for private leasing.

After owning the car for six years, the car will be worth around 20% of its original value, excluding VAT, adds Twine. A brand new car worth R500 000 will be worth about R100 000 after six years, if you are lucky.

“To avoid the early rapid depreciation of a new vehicle, rather buy a second-hand car,” advises Twine.

Let’s look at the numbers: instead of spending R500 000 on a new car, one could buy a three-year-old model of the same type for R300 000 and invest the balance.

The cost of ownership of the new car is R400 000 during the period. Meanwhile the R300 000 car after seven years will be worth R60 000, so the depreciation cost will be R240 000. At only 4,2% a year after tax, a R200 000 money market investment would have grown over six years to R256 000. The second-hand car owner is thus ahead by R16 000 while the new car owner is down by R400 000. Had the second hand car buyer put the money into the JSE, the relative situation would have been far better.

Some makes and models depreciate faster and this all depends on market forces, says a statistician who monitors car values.

“If the market likes it, will depreciate more slowly,” he reckons.

He adds that the technology race is over and the reliability of a particular is no longer a factor. Whether a car holds its value depends more on what car the public would like to be seen in. Reputation of the brand is critical.

Lower-priced vehicles suffer less depreciation because a larger number of prospective second hand buyers can afford them, says Twine.

Twine says the rate of increase of new car prices in the future determines how fast a particular make and model will depreciate.

He maintains that “the higher car inflation is, the greater the residual value and the lower the depreciation”.

Other factors do affect the rate of depreciation, he adds. “Historically, the slowest depreciation of vehicles hangs around the 1800cc engine size, manual transmissions and diesel engines”.

Sources: recommended retail price figures from Car Magazine editions from 2003-2005. Trade values from TransUnion Mead & McGrouther Auto dealers Guide.

http://www.moneyweb.co.za/mw/view/mw/en/page62053?oid=38649&sn=Daily%20news%20Detail

Monday, September 3, 2007

Has your car lost half of its value?

Some cars on the SA market lose up to half their value in one year according to a study of car depreciation by Moneyweb, including certain Renaults, Chryslers and Nissans.

Depreciation is often the most expensive component of car cost in the early months of a car's life.

It found that Volkswagen, Mercedes-Benz and Porsche held their value best in percentage terms while three models of Renault's Laguna range lost the most value in the first year.

The Laguna 3.0 Privilege depreciated by 52 percent and the Laguna 2.0 Expression by 49 percent.

Other poor performers were Chrysler's Crossfire sports car which plummeted in value by more than 40 percent, while the Nissan Almera lost 38 percent of its new value in a year.

The table is split into two pages – car manufacturers A-L and M-Z - and is based on Trans-Union's Auto Dealers' Guide, the "bible" of used car values, which uses real prices paid for cars across the country as a reference for car dealers.

It compares the new prices of vehicles to their present trade value and expresses the depreciation as a percentage, based on a car in standard condition with an average mileage.

Econometrix analyst Tony Twine said: "A car's residual value is hit heavily in the year it's discontinued; its value is lower than usual a year later but by the third year it's more or less back to normal."

Another motoring analyst said Nissan's volume models depreciated badly due to huge sales to the rental industry at severely discounted price; these cars were then dumped on the dealer network after their time with the rental companies.

He added: "Almeras also suffered from a falsely inflated new list price to make them appear to be priced along with their competitors. However, the real price you paid was always way below the stated retail price."

The car that held its value best was the Porsche 911 Carrera Cabriolet which depreciated by 9.49 percent in a year - a modest percentage, although a rather steep R94 425 in rand terms.

The next best value-holder was the Mercedes ML SUV at 10 percent in one year. The Porsche and VW stables had the most models with the lowest depreciation.

Data disputed

The average depreciation of the 824 vehicles surveyed was 22 percent in the first year compared to 27.16 percent in 2005.

Twin said many manufacturers and dealers disputed the use of the Auto Dealers' Guide figures in the survey but could not offer a substitute as no other statistics exist in the motoring industry.

"When you trade in your car, the first thing dealers take out of their pocket is this guide. They seldom budge from the figures when working out a trade-in value."

http://www.motoring.co.za/index.php?fArticleId=3742521&fSectionId=751&fSetId=381

Image A-L Click on the Image to enlarge
Image M-Z Click on the Image to enlarge