Maybe you've started a new job and your accommodation and groceries are sorted too, but you're sick of taking Taxis and Ubers. You reckon the time has come to take things to the next level, and naturally, you're considering purchasing a car - but you've not had enough time to save up for one. Is there someone out there who will finance you? We've done our research to bring you an answer, but there are variables. We recommend reading: Car Finance 101 - key terms, explained!
So, can you buy an affordable car on finance if you earn R6000 per month in South Africa?
It's not completely impossible to buy a car on finance if you earn R6000 per month; one financier requires as little as R5000 per month, while others, such as WesBank, says you need to earn at least R7500. But that's not to say you're going to qualify for finance.
(We recommend reading What is the minimum income for car finance here.)
The amount you can borrow will also depend on various factors, such as your credit score, employment status, and expenses. Lenders will typically look at your debt-to-income ratio to determine whether you can afford the monthly repayments.
Check out our car finance calculator to see how much your repayments would be.
How do you find out if you can afford a car on finance?
To determine if you can afford a car on finance, you should consider the following factors:
- Credit score: A good credit score is essential to qualify for car financing. If you have a poor credit score, you may be required to pay a higher interest rate or provide a larger deposit.
- Employment status: Lenders prefer borrowers who have a stable income and employment history. If you are self-employed or have a short employment history, you may find it harder to qualify for car financing.
- Debt-to-income ratio: Lenders will look at your debt-to-income ratio to determine whether you can afford the monthly repayments. Your debt-to-income ratio is the percentage of your monthly income that goes towards paying off debt. A lower debt-to-income ratio is better, and most lenders prefer a ratio of 36% or less.
- Expenses: You should also consider your monthly expenses, such as rent, utilities, and groceries, when determining how much you can afford to pay for a car. And, then there's car insurance, fuel, and wear-and-tear items such as brake pads and tyres.
We recommend that you use a car finance calculator to get an estimate of how much you can afford to borrow and what your monthly repayments will be. Keep in mind that taking on too much debt can lead to financial difficulties, so it's important to borrow responsibly and within your means.
Let's say you earn R6 000 per month, which leaves R72 000 as your annual salary and a maximum of R21 600 per year to spend on your vehicle. This means a total of R1 800 per month can be paid on your personal mobility needs, including the servicing, fueling and insurance, not leaving much for the monthly instalments on what needs to be a reliable vehicle. We are not saying this is impossible, but simply that the variables must be considered. - Sean Nurse, AutoTrader
Related: Get a comprehensive run-down on all matters pertaining to car finance here.
What are the basic requirements for vehicle finance in South Africa?
- To qualify for vehicle finance, you need to be over the age of 18, a South African citizen or foreign national with permanent residency, have a valid driving license, and usually, you should have an income of at least R7 500 per month, according to WesBank.
- Most other finance institutions require that you earn a minimum salary of R6,500 per month to qualify for vehicle finance; however, there are institutions that require you to earn as little as R5000.
- Finance institutions will generally only finance a vehicle if it costs more than R30,000, but there are exceptions.
The basic requirements for vehicle finance in South Africa include:
- A copy of your valid ID document
- Proof of residential address (not older than 3 months)
- 3 months bank statements
- Proof of income (a recent payslip or a letter from your employer)
What are the options for buying a car with a low salary?
If you have a low salary, you may still be able to buy a car through various options, such as:
- Rent-to-own services: There are various rent-to-own services in South Africa, such as Planet42, which offers a flat monthly subscription-based fee for the vehicle of your choosing from many various car brands until eventually you buy it out. It is a great way for South Africans with both high and low credit scores to not spend a large sum of money at once and get a great vehicle that will last them for a very long time. However, some South Africans haven't had great experiences, so it's best to read some reviews on Hello Peter. To read more about this option’s pros and cons, please click here to read Car Finance Options Explained: Car Leasing.
- Cheaper cars: It would be far better to wait a while, save up some cash, and buy a cheaper car; this will get you mobile, but without the debt load. It’s important to consider the purchase price of a vehicle when determining which car you can afford, rather than per-month payments. Low monthly payments can be deceptive and seem appealing, but you’ll be paying them for a longer amount of time, which will jack up the interest rates and make you pay more money overall.
Verdict
It is probably not impossible to buy a car on finance if you earn R6,000 per month, but there are many other factors that banks or finance houses take into consideration as well, and you may still get turned down anyway. Good luck!
