R206 per month relief coming for South African motorists
As interest rates come down, South African motorists can expect to pay far less on their car loans, with the average monthly repayment coming down by over R200.
Inflation has gradually moderated in South Africa over the past two years, putting pressure on the Reserve Bank to cut interest rates.
Since November 2021, the bank has raised rates by a cumulative 475 basis points to tackle rising inflation, bringing them to a 15-year high.
Since reaching the peak of interest rates over a year ago, the Reserve Bank has been extremely cautious in beginning its cutting cycle.
Stanlib chief economist Kevin Lings said the bank has been hesitant to cut rates because it fears introducing more uncertainty into financial markets during the volatile period during and after South Africa’s national election.
The bank has also been clear in its desire to see inflation sustainably below the midpoint of its 3% to 6% target range.
Thus, interest rates have remained higher for longer. However, this is expected to change in September when the Reserve Bank’s Monetary Policy Committee (MPC) meets again.
Lings expects the MPC to begin cutting rates at this meeting, with a 25 basis points cut signalling the beginning of its cutting cycle.
When coupled with declining inflation in the US and an increased likelihood that the Federal Reserve will begin cutting its rates soon, the Reserve Bank will have more room to cut rates over the next 12 months.
However, Lings cautioned that this cutting cycle is likely to be short and shallow, given that there are still significant drivers of inflation in South Africa.
Thus, he expects the MPC to only bring interest rates down by a cumulative 100 basis points over the next year.
This will provide some relief for consumers, but rates will remain well above their pre-Covid levels.
Lings’ expected rate cuts will bring the repo rate to 7.25% and the prime lending rate to 10.75%.
This forecast will still bring substantial relief to South African car owners, reducing their monthly repayments by over R200 on average.
According to WesBank, the average amount for a new vehicle financed through their institution was approximately R410,000.
This means that individuals who purchased a car at this value and secured a loan at current rates will pay R206 less per month on their repayments at a forecasted prime rate of 10.75% by July 2025.
This is also expected to boost car sales, with the cost of purchasing a vehicle declining as interest rate pressure eases.
“Vehicle price inflation, high interest rates, and the general rising costs of living are all impacting the ability of new car buyers to enter or stay in the market,” said Lebo Gaoaketse, head of marketing and communication at WesBank.
“Until there is some relief in interest rates, greater incentive deals from manufacturers, or a significant shift in general inflation or earnings, the new vehicle market will continue to remain under pressure,” he added.
The table below highlights how much you’ll save on your car repayments every month, according to WesBank’s vehicle finance calculator, if the forecasted 100 basis points interest rate cuts come into effect next year.
| Value of the car | Current rate (11.75%) | Expected by July 2025 (10.75%) | Change |
| R175,000.00 | R3,966.00 | R3,878.00 | -R88.00 |
| R200,000.00 | R4,519.00 | R4,418.00 | -R101.00 |
| R225,000.00 | R5,072.00 | R4,959.00 | -R113.00 |
| R250,000.00 | R5,625.00 | R5,499.00 | -R126.00 |
| R275,000.00 | R6,178.00 | R6,040.00 | -R138.00 |
| R300,000.00 | R6,731.00 | R6,580.00 | -R151.00 |
| R325,000.00 | R7,284.00 | R7,120.00 | -R164.00 |
| R350,000.00 | R7,837.00 | R7,661.00 | -R176.00 |
| R375,000.00 | R8,390.00 | R8,201.00 | -R189.00 |
| R400,000.00 | R8,943.00 | R8,742.00 | -R201.00 |
| R425,000.00 | R9,495.00 | R9,282.00 | -R213.00 |
| R450,000.00 | R10,049.00 | R9,823.00 | -R226.00 |
| R475,000.00 | R10,601.00 | R10,363.00 | -R238.00 |
| R500,000.00 | R11,154.00 | R10,904.00 | -R250.00 |
| R525,000.00 | R11,707.00 | R11,444.00 | -R263.00 |
| R550,000.00 | R12,260.00 | R11,984.00 | -R276.00 |
| R575,000.00 | R12,813.00 | R12,525.00 | -R288.00 |
| R600,000.00 | R13,366.00 | R13,065.00 | -R301.00 |
| R625,000.00 | R13,919.00 | R13,606.00 | -R313.00 |
| R650,000.00 | R14,472.00 | R14,146.00 | -R326.00 |
| R675,000.00 | R15,025.00 | R14,687.00 | -R338.00 |
| R700,000.00 | R15,578.00 | R15,227.00 | -R351.00 |
| R725,000.00 | R16,131.00 | R15,768.00 | -R363.00 |
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