What you can buy based on your salary
This table is designed to give you a realistic idea of what car price you can afford based on your monthly income. It's important to remember that this is a guideline, not a guarantee. Before approving a loan, lenders will also look at your credit score, existing debt, and other expenses.
In South Africa, a good rule of thumb is that your total vehicle-related expenses (car payment, insurance, fuel, and maintenance) should not exceed 20-25% of your gross monthly income. The table below focuses on the car price, assuming a good credit score and a standard loan term.
Your Car Affordability Guide
Important Factors to Remember
Your credit score is key: A high credit score (670+) will likely get you a better interest rate, lowering your monthly payment and increasing your affordability. A lower score will have the opposite effect.
The deposit: A deposit (or down payment) can significantly lower your monthly instalments and the total interest you pay. The more you can put down, the cheaper the car becomes in the long run.
The interest rate: The interest rate you are offered is the most significant variable. A difference of just 1-2% can change your monthly repayment by hundreds of Rands.
Loan term: A longer loan term (e.g., 72 months) will give you a lower monthly payment, but you will pay significantly more in total interest over the life of the loan. A shorter term (e.g., 48 months) means higher monthly payments but less total interest.
The full cost of ownership: Don't forget to budget for other expenses:
Car insurance is mandatory for financed vehicles, costing hundreds or even thousands of Rands a month.
Fuel: Fluctuating fuel prices can be a major monthly cost.
Maintenance & servicing: Older cars, in particular, may require regular and sometimes expensive repairs.
Licence & registration fees.
You need a decent credit score to get car financing
The reality of getting any credit extension in South Africa is that you will be judged on your credit score. The lower your score, the less likely you will be approved.
Several factors affect your personal score, from the number of accounts you have to how you manage your payments and your existing credit lines.
Related: Where can you finance a car with bad credit?
Factors that influence your credit score are:
- Credit applications within the last 6 months
- Usage of credit (more than 50% of available limit)
- Payment history
- Open accounts
- Defaults
- Court Judgements
Check out AutoTrader's Car Subscription Service here
The credit scoring system and you
Take a look at these ratings to find out whether a finance institution will approve your application:
- 300 and 579, your rating is very poor, and you will most likely not be approved for car finance.
- 580 and 669, your rating is fair, and you are considered a subprime borrower. The dealership will consider your application.
- 670 and 739, you have a good rating, and as such, you are not likely to default on your finance agreement. Finance will be approved.
- 740 and 799, you are very good and likely to receive better than average interest rates from finance houses.
- Your 800 and 850 ratings are exceptional, and you are considered to be at the top of the list for the best interest rates from lenders.
What else affects your credit score? The RCS Group explains this here and offer a few tips, too.
It pays to know your credit score
There are several ways to check your credit score. You can visit Transunion or Experian where you can get one free credit score check per year. (Experian also says they won't penalise you for checking your credit score with them on My Credit Check.)
The results are live, but a further inquiry will cost you if you try to check again. You can also use Clearscore, but this service is usually about a month behind as it is free. If your credit score is nonexistent or you don't have a good enough score, you can ask someone to sign a surety for you, but this has its own issues, which you can find out about here.
