Cost of ownership considerations
Many starry-eyed first-time buyers may be blissfully unaware of the actual car cost. The real cost of buying and owning a car far exceeds the price displayed on the windshield at the dealership or the bold numbers at the top of an ad.
Related: What is the average cost of ownership for a budget-friendly car?
Several considerations need to be kept in mind that go beyond the initial sale price of the vehicle. These considerations are vital to your future car ownership experience. We delve a little deeper and uncover the hidden costs many buyers may not consider when buying the car of their dreams.
How much does it cost to do change of ownership of a car in South Africa?
Sticker price
The price displayed may not be the price you need to pay. There may be extras called on-the-road costs, licensing, and delivery fees that will be added to the price of the car. Once you have ascertained the true price, you can work out the monthly instalment and see if you can afford it. Just because you can afford the monthly repayment doesn't mean that its the end of the story. You need to remember that that is only half the true cost.
Pro Tip: Familiarise yourself with car finance terminology to better understand your contract and make educated financial decisions.
Insurance
Any vehicle that is under finance is required by law to be insured. This protects not only the financier but also the financed vehicle. Depending on your risk profile, the cost of this insurance can get expensive, sometimes approaching the monthly repayment amount, essentially doubling your monthly outlay. We have heard horror stories of buyers taking out insurance to get delivery of the vehicle and, in 2-3 months, cancelling their insurance coverage. This is not only illegal but a bad idea.
Rather, keep your insurance in place to protect yourself and take a smaller car payment.
Maintenance
For vehicles that are out of their maintenance plan, you will need to pay the service costs, and depending on the make and model of the car in question, the maintenance costs can be high. You will need to budget for these costs, and depending on how much mileage you travel, the vehicle will need servicing more often. The smart thing here is to set a small amount aside every month to have a kitty to draw from should the car need some form of mechanical intervention.
You should do this anyway, as you never know when something on the car might need replacing. Once again, depending on make and model, replacement parts and labour can be prohibitively expensive.
Fuel
A large part of owning a car is keeping it running; without fuel, you aren't going anywhere. Some cars are light on fuel and can easily be managed. Larger cars with bigger engines will naturally be heavier on fuel. Suppose you don't have enough in your automotive budget for the month. In that case, you technically can't afford to run the car, and this is not only for day-to-day driving and commuting to work, but also includes driving for holidays and longer distances. Work out how much the car will cost you monthly and add that to the purchase price, insurance and maintenance costs to reveal your actual monthly automotive budget.
Depreciation
If you have kept your car pristine and kept up with services and maintenance, when it comes time to trade it in for a new set of wheels, you can expect a decent return. However, keep in mind that as tech and features have progressed over the time you've had the car, the overall value will also have decreased. Cars are naturally depreciating assets, and it is not very often that you can get the same or more for your car than what you paid for it.
Some cars also depreciate much heavier than others (were looking at you premium German models!) so factor this in when deciding to sell.
