Getting a new car is always a thrill. Its looks, performance, that indefinable new-car smell, the features and gadgets all contribute to a feeling that you’re moving along in life.
Unfortunately as the factory freshness starts to fade, reality sets in. The monthly instalments are a bit of a stretch and the running costs are more than you anticipated.
You love the car, but it’s just costing too much. So you look for ways to save a bit. That’s when you remember that when you bought it you took out a comprehensive insurance policy. You’re a careful driver, you always park your car in the garage at night, so is it really worth paying for that insurance?
It may be tempting to cancel the comprehensive insurance or stop paying the premiums, but you could end up in an even worse financial situation if your car is damaged or stolen.
Even though you may think of the car as yours, if you’ve borrowed money from a bank or finance company to buy it, legally it’s theirs until you’ve settled the debt. What’s more is that in most cases by cancelling or defaulting on the insurance you’re in breach of the finance contract.
This means that if the car is damaged, written off or stolen, you’re still personally liable for the outstanding amount.
You could end up owing hundreds of thousands of rands on a car which you no longer have or can’t drive. That’s going to be a serious financial setback for most people, particularly those who rely on having a car to earn an income or get to work.
You should also be aware that when the finance company discovers what you’ve done it will enact the asset protection insurance clause that is included in most asset finance contracts. This means that the bank or finance company can enforce payment to ensure the debt is covered if anything happens to the car.
If you are struggling with the monthly payments there are more sensible ways to save motoring money than cancelling or defaulting on your insurance. Here are some:
Car pool: share the costs of commuting by teaming up with some colleagues.
Drive sensibly: Harsh acceleration chews fuel. A smoother driving style will save you money. If you can, try to avoid stop-start rush-hour motoring. It burns fuel and increases the wear-and-tear on your car. Instead try to get to the office a bit earlier or work a bit later.
Don’t be a drag: your roof racks may make you look cool and sporty, but you’ll save some petrol money if you take them off when you don’t need them. Reducing drag will increase your fuel economy.
Keep the pressure perfect: Underinflated tyres will add to your fuel bill. Don’t be tempted to over-inflate as this can be dangerous and will cause wear. Follow the manufacturer’s specifications.
Service regularly: Sticking to the service intervals will ensure your car runs optimally. It potentially also prevents massive, costly repairs. Not doing so if your car is under warranty could invalidate the guarantee.