How much do you need to earn in order to afford a new car?

A new car holds a very special appeal. Knowing that you're the first one to put any serious mileage on the clocks, that you're the first one to take it out on the open road certainly is special. Furthermore, a new car gives you the peace of mind that it hasn't led a hard life of abuse and neglect, and is only shrouded in a glossy, metallic veneer. There's also the comfort of knowing that you have a manufacturer warranty looking after you so that, should you encounter any manufacturing defects, your pride and joy will be covered.

These are all aspects of new car ownership that make complete logical sense. It's not to say that all used cars are lemons, but they do exist, and an unsuspecting buyer could potentially sit with an expensive repair or breakdown if they opt for a used car, rather than a new one.

Related: Can I finance a car with low income?

But a new car is an expensive acquisition. Sadly, in South Africa, cars are a necessity and manufacturers know this. Add to this our weak currency and an imported vehicle (or even just the materials to produce one locally) starts becoming rather expensive and out of reach of many. So how much do you need to earn in order to be able to afford a brand-new, out-the-box, set of wheels (with a roof, bikes excluded here)?

The first thing to remember is to be responsible. While you may just have landed your first job and you're making some moola, there are many other things that take priority over a car. It's for this reason that we recommend you only spend within your means. What's the point in having a nice new car if you can't afford the fuel for it, or you are forced to live off of 2-minute noodles and dry Salticrax?

 

To avoid a potential catastrophe, we always recommend that you spend no more than 20% of your nett salary on a car repayment. Your nett salary is the salary that is deposited into your account after the taxman has taken his share. If it sounds like very little, chances are it is, but that's because this adult thing requires a modicum of responsibility. The balance of your salary should be going to rent or a bond (30%), medical aid (10%), living expenses; such as food, phone, fuel and the likes (approx 30%)

Using the above percentage, we can work out how much we can afford, but there is a catch. Fully comprehensive insurance is required when buying a car on finance. It's in this way that the bank looks after their investment (and it remains theirs until paid for in full) and looks after you, ensuring that the settlement is covered should the vehicle be written off in an accident – you wouldn't want to be paying off something that doesn't exist, would you?

 

Because of this, we have to include the insurance into that 20% that is reserved for the car payment, it's a non-negotiable. For insurance, younger drivers with less experience and first-time car owners can look at an amount of approximately R1000 per month.

To help you with your calculations, AutoTrader offers the use of a handy finance calculator. By clicking here you will be able to enter in the specifics pertaining to the vehicle price and the finance agreement you wish to enter into. This will help you see how much a particular car will cost each month based on how much deposit you are able to put down, the interest rate you would require to make it feasible and how many months it will take to repay.

What is the cheapest car you can buy in South Africa?

By selecting the Estimate Repayment option in the search bar of the AutoTrader landing page, you will be able to sort through vehicles based on your affordability. By clicking on Pre-Qualify Now, you will be redirected to the pre-approved finance service that AutoTrader offers, allowing you to start the finance application process and see if you qualify. Read more about car finance here. AutoTrader Car Finance Explained