Excited to buy your first car?
Filipinos are no doubt car enthusiasts. Every time there are promotional showrooms in malls, we can’t help but stick our heads into the promoted vehicles and sometimes dream of driving one home.
There is more to car buying than just walking around a showroom or browsing car dealer websites and car unit prices. Getting a car will be one of your biggest purchases you’ll make in your life, or perhaps an investment considering that now we have Grab and other ride-hailing apps.
Buying from car dealers is the most known way of getting a ride. If you drive through EDSA you will pass through countless showrooms taking pride in precious brands such as Bugatti, Lamborghini, Volkswagen, Ferrari, Mitsubishi, Toyota, and Subaru to name a few.
Of course, dealers will sweet talk potential buyers into getting a car and perhaps some add-on packages.
5 Truths When Buying a Car From a Dealer
A Zero-Interest plan offered by a car dealer can have hidden charges.
Zero-interest is a promotional tactic. Take time to compute, and you will know that there will be some hidden charges among the itemized costs. This can only be possible if you give a high amount of down payment. Some trusted dealers may not offer ‘zero-interest’ but will be willing to give discounts.
To prevent falling prey to this so-called promotion, make sure you have an itemized breakdown of what you have to pay. Check if there are items you don’t need which you can cross-out.
Big Discount is part of promotions. Check it with the Department of Trade and Industry.
When you see the word discount, do not get too excited yet.
Some dealers give discounts, but they will entice you to buy other add-on products. For example, you may get a discount if you get the insurance from your dealer, but you could have gotten far better insurance from a provider that is not affiliated with your dealer.
Dealers must not decline your purchase if you want to buy with cash.
You can either buy with cash or through financing from a bank or a private moneylender. The dealer must not decline if you want to buy in cash, though this means less commission on their part.
When a bank finances a car purchase, dealers usually get a cut, especially if you get the in-house financing. In-house financing is getting a loan from the dealer’s partnering bank.
Dealers will tell you that you can quickly get your car loan approval if you get in-house financing. The truth is that the dealer’s loans are already pre-approved. This will cause you more in the long run.
Researching for the best auto loan and taking care of the paperwork yourself can save you thousands. Most banks offer car loans with 28% to 32% interest rate per annum, while dealers’ financing can have interest rates as high as 60%.
The dealer must not force you into getting their car insurance.
Dealers try to convince their buyers to purchase insurance from them together with the car. While it offers advantages such as fewer transaction fees, fewer people to deal with, and faster process, you must not be forced to get it from them.
You have a choice to get insurance from a third party if you think that it has better offers that best fits your needs. Banks offering auto loans may also have the policy to get car insurance from them. Weigh your options well, as it might cause you more than you have anticipated. It is still best to get car insurance from a reputable third party.
You don’t have to pay more to reserve a unit.
Popular cars should not cost more than they actually should. If the dealer offers to get the unit sooner than other dealers but asks for a fee, then you are actually getting tricked. There are also cases when dealers ask for reservation fees to secure their promo if buyers consider purchasing later.
However, if the buyer decides to back out, the dealer won’t return the reservation fee. In case you decide not to push through with the purchase, you must get back your reservation fee, and if you take up the deal, then the fee must be deducted from the car’s total price.
Requirements to Buy a Car in the Philippines
When looking for a car loan, you must also check the required documents and eligibility they are imposing. All lenders will naturally ask for a valid ID or two. Many of them will ask for additional loan-specific paperwork such as payslips, Certificate of Employment, proof of citizenship, proof of address, and others.
You must present all the needed documents, or else your loan will not be processed. You might also be asked to pay an appraisal fee in case you are buying a pre-owned car.
Another thing to consider is the downpayment. How do auto loans work? The buyer must pay a down payment of at least 20% to 30% of the car’s purchasing price. Then, the lender will pay for the rest. It is your responsibility to repay the amount loaned by the lender with the agreed payment amount.
The more down payment you are willing to pay, the shorter the loan you have to get and the lesser the interest rate you may have to pay.
Besides the loan capital and interest rate, you still have to pay for insurance and other fees you might have overlooked. There are also various repayment schemes. Choose the one which gives the flexibility you need.
Tips for Buying a Brand New Car in the Philippines
As said earlier, there is more to car purchasing other than choosing a car in a showroom and paying up either with cash or through an auto loan. You have to consider certain inevitable expenses that come with the car, such as parking, gas, insurance, monthly loan repayment, and regular maintenance, not to mention the sudden breakdown of air-conditioning and malfunctioning breaks.
If you think you can handle these in addition to your usual monthly necessities, then you are ready for your first ride.
Tip #1: Make a checklist of what you want in a car.
It is understandable to fall in love with the car at first sight suddenly. However, you must be realistic and choose the car that best fits your needs, especially if you already have kids.
You also have to consider the place you live in and the mileage it will take when you go to work and go around doing your usual errands.
Consider the purpose of buying a car. Is it for family use or business? Then will you prefer a sports car, a family van, or a pickup?
If you have a small family or are still single, you can get a sedan with excellent fuel mileage. If your small business needs to transport goods not fit in a sedan, then a small pick-up truck will do the job. Focus on the necessities and not the wants unless you have enough savings to suffice both.
If you are more comfortable with a manual setting, you can put it up in your checklist, unless you have decided to learn the automatic car setup. Get a bit shaky when parking? You may opt for a car with parking aid sensors.
There is a popular debate whether those who do not own parking spaces or garages should purchase a car. The Philippines has a serious problem with road congestion as some car owners park their vehicles on the roadsides because they do not have any other place to park. Should this proposed bill be approved, you have to consider if you have enough parking space in your own place.
Tip #2: Look around for the specific car you want to buy.
Do not focus on one or two dealers. Shop around, ask friends and workmates, and check the social media accounts of the dealers you are interested in.
Check the comments and reviews of their past clients. This will give you an idea of the company’s culture and dealing methods. Remember the checklist you created and try to find the list that suits your preferences best.
Stick with the checklist because there will be cars that will potentially tempt you, not to mention dealers who are good with sugarcoating.
Tip #3: Decide if you are going to pay in cash or with an auto loan.
Paying in cash can help you budget your finances. There will be no monthly repayments, which could take 1 to 5 years, and you’ll have fewer transactions to do.
If you are going to use an auto loan, take the time to shop around for the best deal, and consider various lenders other than banks. Banks have more strict policies, and if you have a poor credit report, it will be hard to get a car loan from them.
When getting a car loan, you must make sure that you borrow well within your income range. You don’t want to go broke over something you can’t afford. Some loans will take more than a year.
Can you alter your monthly budget without going hungry or worse broke?
Tip #4: Find The best car insurance in the Philippines.
- Compare prices and company track records. Low prices may mean minimal coverage, and expensive ones do not mean the best insurance. Please read the comments of their past clients in their social media accounts to give you an idea of their services.
- Ask the insurance provider if they offer a fixed deductible. If included in the policy, the fixed deductible is the amount of money you have to pay for your car repairs before your insurance takes over the rest of the cost.
- Declare accessories or modifications. Some insurance does not cover modifications and accessories, do not forget to declares these and ask if they will cover them. Others may cover these but with added monthly payments.
- Check the coverage. Determine the amount of Property Damage and Bodily Injury coverage. Others would cost P500 000 for broader coverage, while P200 000 can be sufficient enough.
- Ask if there is a no-claims bonus. Be careful when making claims. If you make any claims on your insurance, this will create a red flag to your provider. Your insurance provider might not renew your contract or might increase your rates. On the other hand, some insurance providers give discounts when you renew your insurance without claiming from the previous year.
Tip #5: Test drive and pay attention to your comfort and other details.
When you get into the car, note how comfortable you can get in and out, how the key easily turns, the leg and head rooms, the steering wheel’s feel, the turning radius, brake, and others. You will use your car for a couple of years. The small irritating stuff you haven’t notice earlier might cause certain bigger annoyances in the future.
Do not hesitate to ask questions, no matter how nonsense some people might think it could be. Ask if you have a spare tire, how to use the add-on feature, how to open the trunk, or how to turn off the alarm easily.
Tip #6: Consider long terms costs.
Of course, you will use gas every time you use your car. If the fuel costs P48.00 per liter and you refill with three liters a day, then that is:
P48.00 x 3liters x 30 days = P4, 320 a month
P48.00 x 3liters x 365 days = P52, 560 in a year
Remember that we are at the age when oil prices can continuously hike for months before it goes a bit lower, then goes up again.
Car loan interest rates
Choose the car loan with the most sensible loan interest. The too low-interest-rate might be suspicious, while too high is also a red flag for loan sharks. The interest rate will greatly affect your monthly budget as you have to deal with repayments diligently. The longer-term you get, the higher the interest you will be paying off for a few years. If you think you can handle a shorter term, then do so.
Also, check if the auto loan has a fixed interest rate or variable. The variable interest rate is subject to change, while the fixed one requires you the same amortization until the loan’s maturity.
Monthly insurance payments
The coverage premiums will vary among insurance providers. Some lenders might require insurance with specific coverage, while some lenders do not. Other lenders also require you to get insurance from them or their affiliated insurance provider. The wider the coverage, the higher the monthly payment you have to take out of your pockets.
- Liability Insurance covers accidental damages, including the damaged properties and the medical bill of injured individuals in the accident. Though it sounds rewarding, you have to know the maximum amount it can cover, depending on the policy.
- Collision Coverage is like liability insurance, but it can pay for the full amount of the damage. If the damage costs more than the car’s value, then the insurance will cover its value.
- Comprehensive Coverage covers your car even when it is parked. We have heard of accidents which involve cars parked at the wrong place at the wrong time. Let’s say your car was parked and got scraped by kids playing around. You can get your insurance to cover the repairs.
- Personal Injury Protection covers the hospital charge of everyone involved in the accident, including the driver and the passengers. We all know that accidents happen when you least expect them, so it is better to get ready for the worse than be sorry in the end. No matter how careful you are, some accident might still happen if the other drivers around you are reckless.
Repair and maintenance expenses
Though you don’t get into any accidents, there has to be some car maintenance works such as change oil to be changed every 5,000 kilometers. If you get your car from a dealer, you might get certain maintenance for free. However, some dealers may offer such promo but with hidden charges on top of your car purchase.
LTO Registration Fee
Certain dealers may offer to handle LTO registration for you, but it may come for a price. Usually, this leads to red tape. It is better to do it yourself since you have to renew your registration.
Your renewal of registration will depend on the digits of your plate number. Let’s say your plate number is XYZ 321. You have to renew your vehicle registration in the first week of January.
- Initial Fee – 1,000.00
- Renewal Fee – 400.00
- Annotation of Mortgage, Attachment, and other Encumbrances or Cancellation – 100.00
- Certificate of Tax Payment per Motor Vehicle – 30.00
- Cost of Regular Stickers and Tags – 50.00
- Cost of Regular Plate –450.00
- Change Classification (for hire to private or vice-versa) – 30.00
- Change of Area of MV Registration – 100.00
- Late registration Fine – 200.00
If you think that you are ready for the car maintenance and repair expenses, you can now go car hunting.
And when you look for a car loan, get the most affordable car loan with the best online lending company – Cash Mart. Expect to experience a smooth online loan process like no other.