Features / 26 May 2021 / Albert du Toit

You’ve got a monthly car budget – Here’s how you should spend it

Whether you’re looking at buying your first car or are selecting a ride for retirement, the most important thing you should ask yourself is: Can I afford this?

The price of the car, or the subsequent monthly instalments, is not the only factor that should be considered – as there are many costs associated with owning a vehicle.

“The total cost of ownership includes the monthly instalment for the vehicle, plus petrol costs, toll fees, annual licence renewal, maintenance, servicing, repairs, and insurance premiums,” said WesBank, a motor vehicle finance provider in South Africa.

“These can sometimes equal the instalment amount itself.”

Budget

Before you start browsing for a car, it is important to first set up your budget.

“Once all the costs have been listed, you will be able to determine how much you can realistically afford to spend on a vehicle,” said WesBank.

Your budget includes items like your bond or rent, school fees, food, water and electricity, medical expenses, and entertainment.

Once this has been calculated, WesBank advises allocating between a half and two thirds of your car-buying budget to the monthly vehicle instalment itself.

For example: If your monthly vehicle budget is R5,000 per month, it is advised not to spend more than around R3,300 per month on the instalment.

The remaining R1,700 will be allocated to fuel, insurance, maintenance, and related expenses.

The market

In South Africa, you can spend anywhere from R6,900 to R16 million on buying a vehicle.

Many consumers purchase a car through a finance plan from a credit provider, with certain repayment agreements that must be met.

Using the repayment terms below, we can get an accurate estimation of what a vehicle instalment will cost on several of the latest cars on the market.

Car Price – R250,000 – R800,000
Payment Term – 60 terms (5 years)
Interest – 9%
Deposit – 10%
Balloon – No balloon payment
Extras – No optional extras

With our estimate in hand, we took to TopAuto Car Prices and found three different vehicles for three different budgets – listed below.

It must be noted that the monthly payments below are for the vehicle finance installment only, and do not include fuel, insurance, and related expenses.