Next to your rent or home loan, a car purchase is likely to be the second biggest expense for an average salaried employee in South Africa.
Yet, while the monthly instalment is often an intimidating figure all on its own, there are many associated expenses that need to be taken into account when embarking on that car ownership journey.
Factors such as loan interest, depreciation, insurance, fuel and maintenance all need to be factored into the equation.
Even a relatively entry-level car can cost you well over R10,000 per month, depending on your unique situation.
R280,000 is a popular entry point for many buyers, with that sum buying you a popular compact SUV such as the entry-level Chery Tiggo 4 1.5 LiT (priced at R279,900) or a mid-level Volkswagen Polo Vivo 1.4 Life (R288,500) or a flagship Suzuki Swift 1.2 GLX auto (R284,900).
There are also plenty of used vehicles available at this level, such as a lower-mileage Toyota Urban Cruiser, medium-mileage Volkswagen T-Cross or higher-mileage Tiguan.
On a R280,000 car, your monthly instalment is likely to be in the region of R5,360, according to WesBank, but could differ depending on the interest rate granted to you, which will be influenced by your personalised credit score.
Insurance costs could differ markedly, depending on the car model, driver’s history and location, but for a R280,000 car WesBank estimates an average monthly cost of R1,739.
Fuel costs are another major bleed from the budget, with even more variables, but at current fuel prices South Africans should be looking at an average of R3,950 monthly.
Ongoing maintenance and upkeep are also necessary to budget for, and while many cars do come with service plans, buyers should be mindful of the time frame in which they will expire, while many used car buyers will have to foot service and repair bills themselves. A monthly amount of R478 has been suggested for an average R280,000 car.
All of that adds up to a monthly amount of R11,527, give or take, that needs to be squeezed within your monthly budget.
Basic Cost of Ownership | |
| Instalment | R5,360 |
| Insurance | R1,739 |
| Fuel | R3,950 |
| Maintenance | R478 |
| Total Costs | R11,527 |
How much do you need to earn?
A generally accepted rule of thumb is that you should not spend more than 20% of your total income on your vehicle repayment, Cars.co.za says, meaning that those buying a R280,000 vehicle should be earning more than R26,800 per month.
Some industry experts recommend that your total vehicle expenses (including fuel, insurance and maintenance) should not exceed 25% of your gross monthly salary and if you follow that advice then the aforementioned case study should ideally require a salary of more than R40,000 net.
However, there is a difference between being able to comfortably afford and qualifying to buy, and technically a car loan of R280,000 could be taken out on a R18,000 net salary (after taxes), according to WesBank, providing that the buyer has few other expenses.
In other words, living at home probably means being able to live your Polo Vivo dream.
But, as with many other things in life, just because you can, doesn’t mean you should.
IOL