You’ve eyed that amazing car, taken it for a test drive, and have already imagined posting a pic of it on Facebook. But what now? You don’t have the liquid cash to buy it, and you can’t exactly put it on your credit card. Yet you still want a cool and reliable car, so you do the next best thing – apply for car finance.

This option allows for a deposit payment, monthly instalments and at the end of the finance agreement, you take ownership of the car. Some agreements require a balloon payment at the end before transfer, which can be quite steep, depending on how much you’ve paid, and over how long. (Most banks won’t finance a car beyond 72 months.)

As you’ll be the eventual owner, there are no restrictions on how far the car can be driven. This also means that you’re responsible for all car maintenance and services for the time their vehicle is in their possession.

Once you’ve found a car that you like, work out how much of a deposit you can put down and how much you can spend per month. Don’t be afraid to negotiate for the best possible price. Don’t forget the extra costs such as insurance, fuel and maintenance. It might sound obvious, but a lot of people only consider the price of the car. Find the best possible Service Plan, Maintenance Plan and vehicle insurance through MotorHappy. With MotorHappy, you’ll have access to advice you can trust, as well as a selection of quotes to choose from.

Once this has all been ticked off, it’s time to get financed! Here are the steps to follow:

• Approach a bank/s to apply for car finance. When you buy a car through a dealership, they will likely handle the financing process for you. If you go this route, you’ll need to bring your ID, valid driver’s license, last three payslips or three months’ bank statements, and a proof of address.
• If the bank approves you, they’ll let you know the payment amount and interest rate that they can offer you for different payment periods (between 12 and 72 months). This is usually based on your credit rating, and how much of a deposit you’re putting down (if you’re paying a deposit at all). A longer finance term will mean you pay smaller monthly instalments, but more interest. Conversely, a shorter finance term means you’ll be paying more each month, but with a lower interest rate.

Generally you have two options when financing your car:

You can either take out a finance agreement that will result in your car being paid off at the end of the term (e.g. 60 or 72 months), or you can lower your monthly instalment by opting to have a balloon payment at the end of this period. This will be an amount that you’ll still owe at the end of your financing period. You can then either sell your car to pay off this amount, or re-finance it and take out another loan, assuming you don’t have the money available to pay it off yourself.

If you wish to pay off your loan early, either because you’re selling your car or because you have the money available to pay it off, you’ll need to ask the bank for the settlement amount, which will be the amount you need to pay now to settle the loan, plus any outstanding interest.