When looking at buying a car, whether it be new or used, many South Africans focus primarily on the monthly instalment, completely ignoring the long list of other costs associated with vehicle ownership.
Often, a decision is made based on emotion, excitement, and a monthly premium that can be squeezed into a buyer’s monthly budget.
According to Lebogang Gaoaketse, Head of Marketing and Communications at WesBank, this narrow view tends to overlook critical financial considerations that determine whether car ownership is achievable.
“The thrill of a new car is undeniable, but it should never come at the expense of financial stability,” he notes.
“When consumers take the time to understand the full financial commitment, ask the right questions and properly stress-test affordability, they place themselves in a far stronger position for confident, comfortable ownership rather than ongoing financial anxiety.”
There are several key factors that need to be considered before a buyer commits to vehicle financing, which are often realised too late.
Gaoaketse explains that life seldom follows a predictable path, and any number of factors may influence a buyer’s ability to meet monthly repayments.
These include a job change, the arrival of a child, unexpected medical expenses or even a promotion that requires relocation.
“Affordability should be assessed against possible changes, not only current income,” he suggests.
“Could you manage your repayments if your income dropped by 20% or if your monthly expenses increased unexpectedly?”
Because vehicle finance agreements can run for several years, any disruption to income may affect a buyer’s ability to afford repayments.
To protect from this, several safeguards exist, although at an additional cost. Credit life insurance, payment relief options or other provisions may seem unnecessary at first, but are invaluable when circumstances change.
Buyers also often ignore the true cost of ownership, which includes insurance premiums, fuel costs, maintenance, interest rate increases and depreciation.
“A vehicle with a R5,000 monthly instalment can easily cost R7,500 per month once the full cost of ownership is considered,” notes Gaoaketse.
Making use of a larger deposit reduces the amount that needs to be financed, lowering monthly repayments, and decreasing the total interest paid over the loan term.
Owing more on a vehicle than its market value creates a vulnerability if the car needs to be sold or is written off.
Understanding South Africa’s vehicle finance market
It is important to understand how South Africa’s vehicle financing market has evolved before committing to a five-year, or even longer, finance plan.
Increasingly flexible repayment structures are available in South Africa, and these are constantly evolving to make car ownership more accessible than ever before.
This flexibility can be beneficial, but could potentially mask affordability challenges.
Gaoaketse explains that while a monthly instalment comprising 25% to 30% of the buyer’s monthly income may appear manageable initially, it leaves limited room to absorb rising living costs or disruptions.
Financial advisers recommend that buyers not spend more than 15% to 20% of their gross monthly income on total vehicle-related expenses.
As such, it is crucial for buyers to fully understand their finance agreements before signing on.
“Consumers should always ask what flexibility exists if they need to restructure payments temporarily, whether early settlement penalties apply, what happens if the vehicle is written off, and whether there are options to reduce monthly commitments if needed.”
“Knowing the answers upfront creates confidence and can prevent significant financial hardship later,” explains Gaoaketse.
He adds that when approached thoughtfully, vehicle finance options offer real value and enable access to reliable transport while preserving capital for other priorities.
“The key is to treat it as a long-term financial commitment, not just a monthly expense.”
“Focusing beyond whether this month’s instalment fits this month’s budget allows consumers to make decisions their future selves will thank them for,” he concludes.
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