What #JunkStatus means for the SA Car Buyer

The winds of economic climate change are blowing at full force, and we are going to feel the turbulence, indeed. 

For those of us who don’t follow news about politics and the economy, but who are worried about where our hard-earned pennies are going, get ready to tighten those belts: our newfound junk status means we’re going to be paying more for everything, from food to fuel and of course, cars.

Standard & Poor downgraded SA to junk status last Monday, thanks to the impromptu cabinet reshuffle which saw Pravin Gordhan step down as finance minister. Rating agency Fitch is currently in agreement with S&P, and it only takes two rating agencies for the junk status reality and rules to set in.

According to Wesbank spokesperson and head of brand & communications, Rudolf Mahoney, SA’s junk status rating will continue to have an effect on the Rand. 75% of vehicles in SA are imported, and a weaker Rand will increase the price. In turn, this will affect vehicle sales, as fewer consumers will have the capital to purchase a new car. The cost of lending will increase too, and banks will be forced to pass this onto the consumer. The weaker Rand also means that we will be paying more for fuel, as oil is bought in US dollars.  In other words, less funds available for cars and travel.

Those consumers who need to purchase cars, will most likely consider pre-owned vehicles.  This will create a demand for used cars, pushing up prices in the process.

So, what can we as consumers do to lessen the blow of our junk status rating? Wesbank offers us some friendly advice:

o   Focus on settling debts as soon as you can;

o   If you can no longer afford your car(s), consider downgrading;

o   Draw up your budget and establish which unnecessary expenses can be cut;

o   Avoid taking on any new debt;

o   If you are in the market for a car, borrow as little as possible. Pay a large deposit,  and pay off the car as soon as you can;

o   Don’t exceed your motoring spend – and remember to include costs for insurance, maintenance and fuel;

o   Plan your monthly budget to ensure that it can absorb price increases.