Finding your way to the office can be challenging when you only rely on public transport. That is why more and more individuals prefer buying their own car. However, affordability is a big factor and finding a reliable car for a good price can be a challenging task. Let's look at some options for individuals earning R10 000 per month.
Related: What are the cheapest cars to pay monthly in South Africa?
Affordability
A basic rule of thumb when purchasing a car with vehicle finance is that the total cost of ownership, which includes the vehicle finance instalments, insurance premiums and fuel costs, should not exceed a total of 30% of your total monthly income. Thus, if you earn R10 000 per month, having your own vehicle shouldn't cost more than R3 000 per month.
If we assume that your monthly insurance premium will be around R500 per month and that your total fuel cost per month will total R1 000. That leaves you R1 500 monthly to spend on a vehicle finance instalment. If you already own an old car, consider getting an Instant Offer on your car. You can use the money raised from selling the vehicle to add to the deposit and reduce the monthly premiums of the finance agreement on your next car.
Related: What credit score is needed for car finance in South Africa
Calculating vehicle price
A standardised example of a vehicle finance agreement will look like this. The vehicle will be financed over 72 months with a 10% deposit. The interest rate is calculated at prime plus 2% for an effective rate of 13.75%. No residual value or balloon payment is selected to avoid any nasty surprises.
Thus, if we reverse calculate the R1 500 per month available for vehicle finance by an individual earning R10 000 per month. The total price of the vehicle that can be financed should not exceed R80 000, provided that the 10% or R8 000 deposit is paid. If you want to try and calculate a better deal, why not try the AutoTrader Car Finance Calculator here?
Related: What is the minimum income for car finance?
Cars you can buy with a R10 000 p/m salary
The cheapest new car available on the market today is the Suzuki S-Presso 1.0 in GL manual guise. The little city runner will set you back R 169 900, and if you use the finance model from earlier, it will cost around R3 130 per month. Thus, a new car will be out of reach for individuals earning R10 000 monthly.
However, if you search for used cars on AutoTrader, select the option to search by monthly repayment and select R1 500 from the drop-down list. You will find quite a few options are available. This ranges from used Volkswagen Polo models to Toyota Corolla sedans and many more. We do, however, recommend following a thorough checklist for buying a used car to ensure that you get the best deal for your cash.
