Hidden expenses can increase the cost of owning a car from R5,000 to R11,500 per month
WesBank warned that South Africans should consider all the hidden expenses when buying a vehicle, which could see the monthly payments on a mid-range car balloon from R5,000 to over R11,500.
WesBank explained that, when purchasing a vehicle, many buyers only focus on the retail price. However, it is crucial to factor in the total cost of ownership to make an informed decision.
To illustrate this, WesBank calculated the estimated full monthly expenses associated with a popular compact car.
This calculation provided consumers with a detailed look at what to expect when budgeting for their next vehicle and all the hidden costs that may come up.
“Beyond the vehicle’s price tag, the additional costs of vehicle ownership include depreciation, loan interest, insurance, fuel, maintenance, and repairs,” the bank explained.
“By considering these extra costs, customers can budget appropriately when deciding on a new car and avoid any potential financial difficulties and pressures associated with their purchase.”
For its example, WesBank looked at a mid-range compact car with a retail price of R280,980, including VAT.
For a vehicle like this, consumers can generally expect to pay an estimated monthly instalment of R5,360.13. This instalment is influenced by the interest rate on your vehicle finance, which, in turn, is influenced by factors like your credit score and the loan term.
The first extra expense to be aware of is insurance. WesBank explained that if you are financing your vehicle, your lender will require comprehensive car insurance.
“Even if you are not financing, insurance is crucial for protecting your investment,” the bank said.
“Insurance premiums vary depending on factors such as the car model, driver’s history, and location, and should be factored into monthly costs.”
For this example model, monthly comprehensive insurance premiums are approximately R1,739.74, providing essential protection against accidents and unforeseen incidents.
The second ‘hidden’ expense is fuel, which is a major ongoing expense to account for.
To estimate your petrol or diesel costs, determine your car’s fuel consumption and the distance you travel each month. In the example scenario, the average monthly fuel cost for the vehicle is R3,949.75.
The third expense to consider is routine maintenance and upkeep, which WesBank describes as a “reality of vehicle ownership”.
For the example model, drivers can expect to pay an additional R478.82 per month for running costs, covering routine servicing, minor repairs, and general upkeep.
Therefore, when combining the monthly instalment, fuel, insurance, and running costs, the total monthly cost for this compact car amounts to R11,528.44.
“By considering these factors, drivers can plan their finances more accurately and avoid unexpected expenses,” WesBank said.
The bank also listed other costs to consider:
- Depreciation: Vehicles lose value over time, and depreciation can be one of the most significant costs associated with vehicle ownership. A car typically loses 15% to 20% of its value in the first year, affecting its resale price and overall cost of ownership.
- Annual expenses: Even if your vehicle comes with a service plan, budgeting for consumables like brake pads, wiper blades, and tyres is necessary. These maintenance costs typically average around 2% of the car’s value annually.
- Vehicle licensing: This is an annual cost that varies depending on the vehicle’s type and model.
- Once-off fees: Vehicle purchases include once-off costs like registration fees and licensing. These costs can vary depending on the vehicle’s make, model, and region.
“It is essential for consumers to recognise that owning a vehicle involves much more than just the retail price or monthly instalment,” WesBank said.
“Understanding the full cost of ownership empowers buyers to make better financial decisions and maintain a more predictable budget.”
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