Before signing a vehicle finance agreement (VAF), South African motorists are advised to fully understand the long-term financial implications beyond simply securing approval.

While approval from a lender may feel like the final step in purchasing a car, it is only the beginning of a commitment that can last five to six years or even longer.

The article highlights that many consumers focus primarily on monthly instalments, but this approach can be misleading as it does not reflect the total cost of the vehicle over the full repayment term.Vehicle finance agreements typically offer either fixed or variable interest rates.A fixed rate remains unchanged throughout the loan period, providing predictable monthly payments that make budgeting easier.

In contrast, a variable rate fluctuates in line with the prime lending rate, meaning repayments can increase or decrease depending on market conditions.

Loan terms commonly range between 60 and 72 months, and while extending the term may reduce monthly instalments, it significantly increases the overall amount repaid.The article also explains balloon payments, where a portion of the loan is deferred to the end of the agreement to reduce monthly costs.

However, this can create financial pressure at the end of the term if the borrower is unable to pay the lump sum, often leading to refinancing and additional interest.

Consumers are further cautioned about early settlement conditions, as settling a loan ahead of schedule may incur penalties depending on the agreement.Importantly, experts emphasise that the true cost of owning a vehicle includes more than just the instalment.Insurance, fuel, maintenance, and tyres must all be factored into a realistic budget.

Consumers are encouraged to ask for the total repayment amount, not only monthly figures, and to ensure they fully understand all terms before committing.