Big win for motorists with car loans in South Africa
The South African Reserve Bank (SARB) has voted to reduce the nation’s interest rates by 25 basis points.
As a result, the repo rate is now sitting at 6.75%, and the prime lending rate has been lowered to 10.25%, leading to a small but appreciable relief for motorists taking on car loans.
Reserve Bank governor Lesetja Kganyago said that while inflation has ticked higher, it is due to non-core items and temporary shocks.
“We continue to see this pressure as temporary, with inflation heading lower again from the beginning of next year. Indeed, recent outcomes have undershot our forecasts slightly,” he said.
According to StatsSA, the Consumer Price Index (CPI) is sitting at 3.6%, which is higher than the 3.4% recorded in September, but below the market expectation of 3.7%.
Inflation has been lower than market expectations over the last three months.
“Because of these downside surprises, together with a stronger rand, and a lower oil price assumption, we have small downward revisions to our inflation outlook, for both 2025 and 2026,” Kganyago said.
“We remain on track to deliver 3% inflation over the medium term.”
In light of this, the MPC decided to reduce the policy rate by 25 basis points.
Consequently, the prime lending rate has come down, which means a lower monthly repayment for individuals with auto loans.
The following table shows how much the new prime interest rate of 10.25% will affect your monthly car finance instalment, based on a 72-month contract with no deposit or balloon payment:
| Car price | Monthly instalment at 10.50% | Monthly instalment at 10.25% | Difference |
|---|---|---|---|
| R100,000 | R1,970 | R1,957 | – R13 |
| R200,000 | R3,847 | R3,822 | – R25 |
| R300,000 | R5,725 | R5,687 | – R38 |
| R400,000 | R7,603 | R7,552 | – R51 |
| R500,000 | R9,481 | R9,418 | – R63 |
| R600,000 | R11,359 | R11,283 | – R76 |
| R700,000 | R13,237 | R13,148 | – R89 |
| R800,000 | R15,115 | R15,013 | – R102 |
| R900,000 | R16,993 | R16,878 | – R115 |
| R1.0 million | R18,871 | R18,744 | – R127 |
| R1.1 million | R20,749 | R20,609 | – R140 |
| R1.2 million | R22,626 | R22,474 | – R152 |
| R1.3 million | R24,504 | R24,339 | – R165 |
| R1.4 million | R26,382 | R26,205 | – R177 |
| R1.5 million | R28,260 | R28,070 | – R190 |
| R1.6 million | R30,138 | R29,935 | – R203 |
| R1.7 million | R32,016 | R31,800 | – R216 |
| R1.8 million | R33,894 | R33,665 | – R229 |
| R1.9 million | R35,772 | R35,531 | – R241 |
| R2.0 million | R37,650 | R37,396 | – R254 |
Car sales on the rise in South Africa
This is the third time this year that the SARB has lowered interest rates, which has had a positive effect on consumer spending.
Carmakers have reported substantial month-on-month and year-on-year growth in 2025, indicating a strong recovery for the auto industry.
Last month, the South Africa new-car market reported an impressive 55,956 sales, which is the highest monthly total recorded since March 2015.
The National Automobile Dealers Association has credited the Reserve Bank’s decision to cut interest rates as one of the key factors driving this growth.
“Lower interest rates enhance vehicle affordability and will help energise demand in both the new and pre-owned vehicle markets, particularly in cost-sensitive segments,” it said.
The decision to cut rates was generally in line with market expectations, where economists and analysts were split between calling a cut or a hold, reported BusinessTech.
The November meeting marks the final rates decision for 2025, as the MPC is expected to meet again in January next year.
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