The pool of new cars in South Africa priced below R200,000 has shrunk to 5 distinct models, but rising interest rates and longer average vehicle financing terms mean the average buyer pays much more than that.
According to data from Lightstone Auto, the average vehicle finance agreement in South Africa now spans six years, or 72 months, while even longer loans are also growing in popularity.
As a result, the current 10.5% prime lending rate means South Africans are spending nearly R250,000 on entry-level hatchbacks that retail for R180,000.
Things may get even worse, with Bloomberg reporting that next month could bring another interest rate hike when the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) meets on 23 September.
In June, consumer prices rose 5%, followed by 4.3% last month, according to Statistics South Africa (Stats SA). At the same time, the rand has also strengthened against the US dollar.
Citigroup South Africa economist Gina Schoeman commented that the numbers are looking good, but that the group anticipates an interest rate hike next month.
“Our view is for one more 25 basis-point hike in September, determined by data and underlying inflation, or unchanged at higher for longer,” she said.
South Africa’s entry-level car buyers are already paying up to 40% more for these sub-R200,000 vehicles, with interest and financing costs making up nearly 30% of the total repaid value.
For example, the cheapest car in our market – the Renault Kwid – retails for R178,799.
With 72 monthly repayments of R3,358, the average buyer will pay more than R246,000 for the vehicle, with nearly R68,000 in interest paid over that period.
The buyer is paying 38% more than the original purchase price, while interest and financing costs make up 27.54% of the total repaid amount.
The only winners in this scenario, besides vehicle financiers, are those who can afford to purchase these vehicles in cash deals.
What it costs to finance South Africa’s most affordable cars
While many South Africans make use of payment agreements like balloon payments or deposits, others cannot afford to pay a lump sum either at the beginning or end of their loan term.
Considering this, and the average loan term of 72 months, the current prime lending rate of 10.5% adds a significant sum to most car loans, including South Africa’s cheapest options.
Below is a list of the five distinct models that can be bought for less than R200,000 right now, as well as what buyers can expect to pay to own them.
Click on their underlined prices for more information on each model.
1. Renault Kwid
- Starting price –R178,799
- Monthly repayments – R3,358 per month
- Total repayment – R246,741
- Difference – R67,942
2. Suzuki S-Presso
- Starting price – R178,900
- Monthly repayments – R3,360 per month
- Total repayment – R246,880
- Difference – R67,980
3. Toyota Vitz
- Starting price – R182,400
- Monthly repayments – R3,425 per month
- Total repayment – R251,710
- Difference – R69,310
4. Suzuki Celerio
- Starting price – R188,900
- Monthly repayments – R3,547 per month
- Total repayment – R260,680
- Difference – R71,780
5. Tata Tiago
- Starting price –R189,900
- Monthly repayments – R3,566 per month
- Total repayment – R262,060
- Difference – R72,160
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