Interest Rates
How vehicle finance interest rates are set in South Africa, what moves them and how to get a better one.
Vehicle finance rates are quoted relative to the prime lending rate, either as a linked (variable) rate that moves with prime or a fixed rate that stays put for the term. The gap above or below prime is decided by the bank's view of your risk: credit history, deposit, the age and type of vehicle, the term and sometimes the relationship you already have with the bank.
A linked rate is usually the cheaper starting point but exposes you to rate increases; a fixed rate costs a little more for certainty. Over a long term, even a small rate difference adds up to a meaningful amount of interest, which is why a strong deposit and a clean credit record are worth real money. The Car4Less finance calculator lets you test how a different rate changes your instalment.
Interest Rates — questions
The questions people ask about interest rates, answered plainly.
What is the difference between a linked and a fixed rate?
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A linked rate moves whenever the prime lending rate changes, so your instalment can rise or fall during the term. A fixed rate stays the same for the whole agreement. Fixed rates typically start a little higher because the bank is carrying the risk of future increases.
How can I get a lower interest rate on my car finance?
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Improve your credit record, put down a larger deposit, choose a shorter term and avoid a balloon where possible. Banks also price mainstream, easy-to-resell vehicles more favourably. Applying with clean documentation through a channel the banks know, such as Car4Less, does no harm either.
Does the interest rate change my instalment a lot?
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Over a typical term, yes. On a longer agreement a rate that is only a little higher can add a noticeable amount to each instalment and a substantial amount to the total interest paid. Use the finance calculator to compare two rates on the same car before you accept an offer.
Can I negotiate the rate the bank offers?
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Sometimes. If you have a strong profile, a competing offer or a larger deposit to put down, the bank may sharpen its rate. It is always worth asking. Your Car4Less consultant can present the offers so you can compare like with like.
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