South Africa’s economy is displaying an ongoing trend of high fuel costs and an increased cost of living, which seems to be here for the long haul. Thus far, petrol prices have gone up by  75c per litre the rand/dollar exchange contributes to the petrol and diesel prices. Unfortunately, neither the Reserve Bank nor the government have proposed any solutions to consumers for dealing with high costs.

Understanding The Cost Of Purchasing A Vehicle Is Important

Many South Africans are facing high costs, stagnant wages, load-shedding, and rising food prices. The Department of Mineral Resources & Energy published an official increase in fuel prices for February and March. This puts more pressure on the financial strain on consumers and compels them to reduce expenditure and stick to a budget.

Factors To Consider When Looking To Buy A Vehicle

With all these costs at hand, consumers in the market are now beginning to consider the cost that comes with owning a car. The major contributing factors to the cost would be your purchase price, model, brand, and class of the vehicle. When it comes to SUVs and 4X4, you pay more than the average cost of owning a car. Additionally, if you want to add extra features rest assured it will be hefty on your pocket.

According to TransUnion, there’s a slight decrease in second-hand car purchases. This decrease is due to consumers feeling the high cost and red tape involved in obtaining a bank loan for a used car.

Let’s Uncover The Actual Cost Of Owning A Car

Mybroadband outlined the costs associated with owning and having a vehicle on the road. Due to COVID-19, vehicle prices have significantly increased, further impacting consumers’ finances. Always ensure you can afford the vehicle installment and additional expenses.

The table below, as per BusinessTech, provides an estimate of the monthly cost of owning and driving a new Polo 1.0 TSI, which averages around R348,000 as of 2023.

*Calculations are based on zero deposit/trade-in values with a 72-month repayment period and 0% balloon payment.

Before Making Your Dream Vehicle Purchase Consider These Costs

Interest And Fees

Financing a car comes with many seemingly hidden costs. Interest rates, although lower than unsecured debt, do make the total cost of the car much higher. There are also initiation and admin fees that the banks would charge along with the financing of the vehicle. *Pro tip shopping around for the lowest interest rate will ensure that you get a good deal.

Insurance

Assets (vehicles) require insurance to protect against loss or unforeseen circumstances. Insurance companies provide quotes based on an individual’s affordability and the level of risk they pose. There are different types of insurance such as third-party and comprehensive insurance.*Pro tip it is always a good idea to regularly get new insurance quotes.

Cost Of Fuel 

The South African Reserve Bank has announced that consumers can expect a fuel price increase for February and March. The cost of petrol and diesel is already slightly high meaning that consumers have to carefully assess this budget item. *Pro tip drivers should be cognisant of vehicle usage and routes to limit this expense. 

Car Maintainance

When you buy a new vehicle, you may have a maintenance and service plan that covers all the costs of routine car servicing. However, with a secondhand vehicle, you’ll likely need to pay for these expenses out of your pocket. Small stretches, dents, and general repairs may need to be paid by the owner.

Balloon Payments

A balloon payment is a deferred finance payment that is paid at the end of the vehicle loan. Typically 20 – 40% of the purchase price, the balloon payment is a once-off lump sum payment usually payable with the last payment of the loan. Many consumers cannot afford this balloon payment as they did not save during the loan term. This forces them to roll the balloon payment into a new vehicle or convert it to unsecured debt, both of which can be costly.

So, Should You Go Ahead And Buy That New Vehicle?

Consumers need to exercise caution when buying a car, particularly with the current fluctuating borrowing rates and high inflation. Always make sure that you have more than enough affordability for the new vehicle installment plus all of these additional expenses.

It might seem glamorous and exciting to have your own set of wheels. However, one needs to look at the financial aspect of this important decision.