A budget of R500,000 when buying a new car gives you access to many options.
This includes the Toyota C-HR 1.2T Luxury, Nissan Qashqai 1.5dCi Acenta Plus, Mini Cooper S Hatch 5-Door, Mazda CX-5 2.0 Dynamic, and Ford Kuga 1.5T Trend.
If you are financing your car, however, the amount on the price tag is not the amount you will pay – as you have to take interest into account.
Financing a car
When financing a vehicle, the financial services provider you sign up with allows you to drive the car home and then pay it off in monthly installments over a set period.
This finance agreement is signed with an interest rate attached to it, and sees you paying a percentage of the financed amount on top of the total you owe.
To provide a practical example, we used the scenario below.
A car buyer wants to purchase Toyota C-HR 1.2T for R500,000, and will use financing from their bank.
They agree to a 5-year repayment plan at a 9% interest rate – and put down a 10% deposit.
No balloon payment or extras were included in the agreement.
- New Car Price – R500,000
- Payment Term – 60 months (5 years).
- Interest – 9%.
- Deposit – 10% (R50,000).
- Balloon – No balloon payment.
- Extras – No optional extra were fitted.
How much you pay back – 10% deposit
To calculate how much the car buyer in the deal above will pay back, we used WesBank’s vehicle finance calculator.
The calculator showed that.
- The amount financed would be R450,000. (R500,000 new car price minus the R50,000 deposit.)
- The car buyer would pay a monthly installment of R9,435 over 60 terms (5 years).
- The total interest amount paid back would be R110,772.
- The total cost of the finance agreement, including admin fees and a finance initiation fee, would be R566,119.
How much you pay back – No deposit
If you are not able to put down a deposit on the car and need to finance the full R500,000, the monthly installments and interest will be higher.
In this situation you would pay:
- R10,473 per month in installments over 60 terms.
- R123,047 in interest.
- The total cost of the finance agreement would be R628,394