Updated March 22, 2017
Excited to buy your first car?
Filipinos are no doubt car enthusiasts. Every time there are promotional showrooms put up in malls, we can’t help but stick our heads into the promoted vehicles and sometimes dream of driving one home.
There is more into car buying than just walking around a showroom or browsing car dealer websites and car unit’s 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 Uber.
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Here are some things you have to know before you go shopping for a car.
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 of 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 about Car Dealers
- 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 Department of Trade and Industry.
When you see the word discount, do not get too excited yet. Some dealers give discounts yet, 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 a far better insurance from a provider which 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 loans offered by the dealer is 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 the financing offered by dealers 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 offer advantages such as less transaction fee, less 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 a policy to get a car insurance from them. Weigh your options well as it might cause you more than you have anticipated. It is still best to get a car insurance from a reputable third party.
- You don’t have to pay more to secure 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 in case buyers are considering to purchase at a later date.
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, then 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.
Things to Know Before Buying a Car
As said earlier, there is more into 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 which 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.
Tips for Buying a New Car in the Philippines
- Make a checklist of what you want in a car
It is understandable to suddenly fall in love with the car, at first sight, however, you must be realistic and choose the car that best fits your needs, especially if you already have kids. You also have to put into consideration the place you are living and the mileage it will take when you go to work and go around doing usual errands.
Consider the purpose of buying a car. Is it for family use or for business? Then will you prefer a sports car, a family van, or a pickup? If you have a small family or you are still single, you can get a sedan which has excellent fuel millage. 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, then 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 be allowed to purchase a car. The Philippines has a serious problem when it comes to road congestion as some car owners park their vehicles on the road because they do not have any other place to park. Should this proposed bill be approved, you have to consider if you have enough space for parking in your own place.
- 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.
- 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, then it will be hard to get a car loan from them.
When getting a car loan you must make sure that you are borrowing the amount that is 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?
Requirements for Buying 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. A lot 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 preowned car.
Another thing to consider is the downpayment. How do auto loans work? The buyer must pay a downpayment or 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 downpayment you are willing to pay, the shorter the loan you have to get and the lesser the interest rate you may have to pay.
Aside from 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.
- Find the best auto insurance companies
- Compare prices and company track records
Low price may mean very limited coverage and expensive ones do not mean the best insurance. 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 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 of 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 it. 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.
- Don’t claim insurance for inexpensive repairs
Be careful when making claims. If you make a lot of 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.
- 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 feel of the steering wheel, the turning radius, brake, and others. You are going to 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 easily turn off the alarm.
- Consider long terms costs
- Fuel 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. 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 diligently deal with repayments. 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 fixed interest rate or variable. Variable interest rate is subject to change, while the fixed one requires you the same amortization until the maturity of the loan.
- Monthly insurance payments
The coverage premiums will vary among insurance providers. There are some lenders who might require insurance with specific coverage, while some lenders do not. Other lenders also require you to get an insurance from them or from their affiliated insurance provider. The wider the coverage, the higher monthly payment you have to take out of your pockets.
Insurance Coverage Types
- Liability Insurance covers accidental damages which include the damaged properties and the medical bill of injured individuals in the accident. Though is sounds rewarding, you have to know the maximum amount it can cover which will depend on the policy.
- Collision Coverage is like the liability insurance, but it can pay for the full amount of the damage. If the damage costs more that the value of the car, then the insurance will cover as much as the value of the car.
- Comprehensive Coverage covers your car even when it is parked. We have heard of accidents which involve car parked at the wrong place at the wrong time. Let’s say your car was parked it got scraped by kids playing around. You can get your insurance 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 it, 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 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 on 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
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