CAPE TOWN, South Africa – With interest rates at a record low one might assume that vehicle owners must have more money in their pockets. However, such savings have been negated by the financial strain on many people due to the country’s various lockdown levels since the Covid-19 virus broke in March 2020.
That includes managing the actual cost of vehicle ownership within the monthly household budget.
The effect of the global pandemic is a growing trend to work at home with many people electing to – or being required – to work from home. One outcome of the blended work arrangement is a reduced use reduced use of cars. The annual kilometres driven will have reduced considerably over the 12 months.
WesBank communications operations Lebogang Gaoaketse told The Corner: ”Current low interest rates and savings on general vehicle maintenance and fuel consumption are positive for owners with a vehicle finance loan so it’s important to understand the total monthly costs of owning a vehicle.
”Fixed monthly payments such as loan repayments and insurance remain so must be included in the monthly household budget. An entry-level car covering 2500km a month is now devouring R7584 against the R7851 of 2019 – a saving of about R270 or 3.41%. Nevertheless, the 2020 average figure is 15.5% higher than five years earlier (R6564) in 2016.
The bad news is that new and used vehicle prices continue increase. The TransUnion SA Vehicle Pricing Index (VPI) for Q4 2020 showed an increase in the costs of new and used vehicles. The VPI for new vehicles rose to 9.6% in Q4 2020 from 2.9% in the same 2019 period with used vehicle prices rising to 2.9% from 1.2% in Q4 2019. With the CPI sitting at 3.3% for Q4 2020, new vehicle price increases remain above inflation and further increases are expected.
Gaoaketse again: ”Vehicle price inflation means consumers spent more for new and used vehicles in 2020 – a trend likely to continue into 2021. In January 2021 the average value of a new vehicle financed through WesBank was R358 390; in January 2020 it was R327 723 – a 9.4% year-on-year average price increase.”
During 2020, vehicle instalments and fuel spend remained the largest portions of the basket, accounting for 79% of the monthly spend. Fuel spend accounted for 34% of the total, with the vehicle instalment amount sitting at 45%. The figures for 2020 show monthly fuel spend averaged R2 566, with the instalment rate significantly higher at R3 433. The monthly insurance cost was R1235 or 16% of the cost, with running costs per month accounting for 5% at R350.
This differs with the mobility basket in 2016, where fuel spend and vehicle instalment costs were more comparable – the average monthly fuel spend was R2,287, slightly less than an entry-level vehicle’s net instalment of R2976. The 2020 figures show that this is no longer the case.
“With vehicles being driven less the average fuel spend was down 6% from R2732 in 2019. However, this does not mean the overall cost of motoring is lower and, while interest rate cuts are always welcome, this alone shouldn’t influence a vehicle purchase.”
‘THE SMARTEST MOVE IS…’
Motorists should take a holistic view when planning a car purchase and ensure that their monthly budget can cover the instalment amount, insurance costs, fuel bills, and savings for maintenance and services. The budget should also make allowances for increased costs down the line, such as a higher interest rate or a fuel price increase (which has materialised. – Ed).
”The smartest move,” Gaoaketse continued, ”is to make provision for rising costs over the duration of the finance contract. Enabling a tool such as the WesBank Mobility Calculator makes financial sense and is there to assist with calculating the total cost associated with their vehicle.