The cost of my new wheels
Can you afford a new car and all the stuff that comes with it?
You may be sick and tired of public transport or you may just feel that owning a black wagon with shiny silver rims will increase your street cred or you may want to display the fact that you are moving up in the world.
Your reasons for wanting to own your own car matter less than whether you can afford a car or not. If you can afford a car, choose wisely; if you can’t afford it yet, start saving for a big deposit.
Can you afford a car?
The average cost of a new entry level car is R100 000. Entry level means that it is a car without all the bells and whistles but it will get you from A to B. All extras like aircon, central locking, stronger engine, costs! You also have the option of buying a demo model or a second hand car, which will save you some money on price and costs.
Very few people can afford to buy a car cash. Generally, you need financing which you will take over 36 (three years) or 60 months (five years). The longer the period you choose, the lower your monthly premium will be but you pay more interest in the end.
Buying a car of R100 000 over 5 years will generally cost you about R2000 per month. This will depend on the exact amount of the car, the percentage of your deposit, the interest rate based on your credit profile and the loan period.
What other costs do you have to keep in mind?
Unfortunately buying a car is never just about the costs of owning a car. You also have to take the following extra costs into account when you do your sums to see if you can afford a car.
- How much will you spend on petrol per month?
- What will it cost to maintain and service the car?
- How much will your insurance be per month?
- How much will you pay for parking per month?
- If you regularly use a toll road, have you budgeted for tolls?
What you need to know about car insurance:
You need insurance on a car for two reasons:
If you get into an accident the insurance will cover the costs of repairing the car.
If your car is stolen the insurance will pay to replace the car.
All insurance companies will expect you to pay an excess on any claims so make sure you know how much your excess is. Save that amount in your emergency savings so that you don’t have to go into debt when you need it.
A forty-year-old woman who drives a Toyota will pay less for insurance than a 23-year-old male who drives a Golf. This is because your insurance premium is based on the model, make and condition of the car, where you live, what the car is used for as well as the age and experience of the driver. There is also a difference between ensuring the car for its market or retail value. Parking a car in a safe place and fitting a tracking device will help to reduce your premium.
What else must you consider?
Be careful of special deals with a balloon payment unless you can be sure that you will have the balloon payment ready when the time comes to pay it.
Time your purchase. It is easier to get a good deal at the end of the month when dealers need to make target or during the middle of the week when it is quiet.
Test drive all the cars you are interested in before you make a decision.
Buying a second hand car can turn out to be very expensive to maintain and service. So make sure you have a full service history or buy from a reputable dealer.
Think about these questions:
- Why do you want to own your own car?
- Have you worked out the true costs of owning a car?