Many South Africans strive to own a car, whether it be new or pre-owned, but fail to consider the costs involved beyond monthly repayment premiums and fuel spend.
There is a long list of ‘extras’ involved in car ownership, including insurance, licensing and registration, annual licence disc renewal fees, and general vehicle maintenance.
The domestic market has seen recent surges in new passenger car sales, and the used sector is performing just as well, but still, South Africa remains a price-sensitive market.
Local buyers are basing their decisions primarily on the vehicle’s purchase price when buying new or used cars.
“It’s important to look beyond just the purchase price and consider the total cost of ownership, which is influenced by several other factors,” said Lebo Gaoaketse, Head of Marketing and Communication at WesBank.
The three biggest contributors to the cost of car ownership are the monthly instalments, insurance premiums, and fuel costs.
In South Africa, a hatchback may cost anywhere from R4,500 to R6,000 to finance, depending on the lending rate and purchase price, while a mid-size SUV may demand R9,000 to R12,000 monthly.
While this may seem manageable on its own, the costs quickly add up once insurance and fuel are added.
The Automobile Association (AA) reports that comprehensive cover for a modest car can range from R1,200 to R2,500 per month, depending on driver profile, the vehicle, the excess attached to the policy, and location.
Drivers may opt for third-party only cover, which may be cheaper, but leaves drivers exposed to the cost of repairing or replacing their own car.
Finally, fuel costs make up a large percentage of monthly car ownership spend, despite recent improvements in fuel prices.
Monthly fuel spend on a passenger vehicle may be as much as R4,000 or more, depending on fuel economy and driving distance.
According to WesBank, when combining the monthly instalment, fuel, insurance, and running costs, the total monthly cost for one of the best-selling hatchbacks in South Africa comes to roughly R11,760.29.
The other costs
Several other monthly and annual costs need to be considered when making the decision to buy a car.
First is the annual licensing and admin fees to legally drive on South African roads, which tend to be in the range of R600 to R1,200 per year, as the amount depends on the weight of the vehicle.
Being fined for driving without a valid licence may prove costly, and fines for speeding or other road violations can be expensive.
Driving causes general wear and tear on parts and tyres, which means replacing them is an inevitable future expense.
Locally-built cars may cost less to maintain due to part availability and not having to be imported. The AA suggests enquiring with dealerships regarding what replacement parts they keep in stock.
That being said, someone still needs to be paid for maintenance. If a car does not come with a plan to cover wear and tear, drivers may end up spending thousands on maintaining their car.
Services every 10,000 or 15,000km while maintaining fast-wearing parts like tyres and brake pads can cost R6,000 or more a year.
Tyres also cost upwards of R2,000 each, and need to be replaced every 50,000km, which for frequent drivers may not be that far apart.
Something that may have a small effect on monthly driving costs is the choice between a petrol or diesel vehicle, a distinction that could mean a difference of a few hundred rand per month.
Drivers who often travel on major highways may see their toll fee bills stack up quickly, adding to the monthly cost of ownership.
Owning a car means taking care of it, and part of that means having it cleaned, or doing it yourself. This may cost hundreds of rands per month for someone else to do it, or hundreds of rands in products to do it yourself.
Vehicle depreciation is not something that is paid monthly, and does not affect cash flow, but with cars losing between 20 and 30% of their value within a year, it does contribute to the cost of ownership down the line.
“Viewing the cost of vehicle ownership from this perspective is important and underscores the need to objectively and honestly evaluate one’s affordability level before signing a long-term vehicle finance contract,” added Gaoaketse.
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