Many people only look at a car's retail price when buying one, but it is important to think about the total cost of ownership to make an educated choice. This article predicts the full monthly costs of an affordable compact car. This gives potential buyers a good idea of what to expect when budgeting for their first or next car.
Related: AutoTrader's Car Finance Glossary of Terms
Budget carefully
In addition to the price of the car itself, many other costs come with owning a car, such as loan interest, insurance, petrol, repairs, and maintenance.
You can only set up an adequate budget when choosing a new car by considering these extra costs. This way, you can avoid any possible financial problems and stress that might come with your purchase, or worse, having to sell your car because you can't afford to own one.
Breakdown of costs
Let's use a small, mid-range car that costs R281 000 at retail, including VAT. You can expect to pay about R5,500 each month for it. Remember that your car loan's interest rate affects this monthly payment. (The interest rate is also affected by your credit score and the loan length.)
Related: Use our Car Finance Calculator to calculate your estimated monthly repayment and total interest based on the car's retail price.
Insurance
Your lender will require full coverage car insurance if you are buying your car on finance. Insurance is important to protect your property even if you are not financing it.
Insurance rates depend on factors like the type of car, the driver's age and history, and the location. These rates should be added to the monthly payment. The monthly rates for comprehensive insurance on this model are about R1,800, and they protect against accidents and other unplanned events.
Read all our articles on car insurance.
The cost of fuel
This is your second-biggest expense, so choose a light on 'juice' car. Find out how much petrol or diesel your car uses and how far you drive each month to get an idea of how much it costs. The average affordable car's monthly fuel cost is around R4000. (If you drive for a living, this will be much higher, obviously, and if the car you have in mind has a powerful engine, it can potentially burn a hole in your pocket.)
Here's how to work out your car's fuel consumption
Maintenance
Regular repair and maintenance are a part of car ownership. People who drive the aforementioned model can expect to pay around R500 a month for running costs, which include regular maintenance, small repairs, and regular servicing. (Read DIY car maintenance tips every South African driver should know.)
Related: What is the differene between a maintenance plan and a service plan?
Total monthly driving costs
The total monthly cost of this small car now amounts to a whopping R11 500, which includes the monthly payment, petrol, insurance, and running costs.
Other costs to consider
Sadly, this isn't where it ends - you need to budget for a few more things so you don't end up out of pocket.
Annual costs: Even if your car comes with a service plan, you still need to plan for things like brake pads, wiper blades, and tyres that wear out over time. These upkeep fees usually add up to about 2% of the car's value annually.
Vehicle licensing: This is a yearly fee that changes based on the make and model of the car. Remember to include this when you figure out your yearly costs.
One-time fees: Buying a car includes one-time fees like licence and registration fees. These costs change based on the car's make, model, and location, but you need to include them in your budget.
Related: Do you have to register and license a car as soon as you buy it?
Depreciation: One of the biggest costs of owning a car is that it can lose value over time. In the first year, a car's value drops by about 15 to 20%, which affects its resale price and the cost of owning it generally.
Related: Why is my car's trade-in value so low?
