The True Cost of Owning a Car

The cost of running a car isn’t simply the price of your monthly instalment – there’s plenty more to consider.

Buying a car isn’t as simple as paying the price listed by the dealer – you’ll need to consider all manner of additional costs. “Many people do not undertake a comprehensive study of the full costs of vehicle ownership in relation to their affordability,” says Henry Botha, Head: Strategy & Business Analytics, Absa Vehicle & Asset Finance.

What affects how much you pay in monthly car loan instalments?

Botha says that it’s crucial to have a grasp of affordability scenarios that are based on the price  of the vehicle. 

Here's an example of how changing different factors  can affect your monthly instalments on the purchase of a car of R200 000. To get an idea of the true cost of the car, you need to add the total interest and service fees to the R200 000.

As the table shows, the most reliable way to pay as little interest as possible is paying a deposit upfront. This lowers the amount of vehicle financing required, but will result in higher monthly premiums. 

If your biggest concern is not having to pay too much per month, then extending the loan period is your best option. But please note that this increases the total amount of interest that you will pay. 

Insurance isn’t just insurance

Wynand van Vuuren, King Price’s Client Experience Partner, explains that there are different types of car insurance, each of which comes with different costs and levels of cover:

• Comprehensive insurance: As the name suggests, it’s comprehensive. You will be covered for almost all damage to your car in an accident, robbery or hijacking attempt as well as damage caused to other cars in an accident, and also if your car has been written off completely. 
• Third party, fire and theft insurance: This provides cover in the case of theft, hijacking, injury to others (third parties) and damage to their property as a result of an accident.
• Third party only insurance: This is the most basic form of insurance, which covers you only for injuries caused to others or damage to their property in an accident.

Read more: Comprehensive Insurance vs Third Party Liability Only 

Hippo’s car insurance quote comparison tool offers many different options from 10 of South Africa’s leading insurers to help you make the choice that is best for you.

Service plans and maintenance

Maintaining a car can be expensive – even if your vehicle is covered by a service or motor plan. Such a plan covers the cost of regular services and replacing certain parts for a certain period, such as two years, or a specified number of kilometres. Remember to check what exactly is covered, as not all parts will be fixed or replaced free of charge.

If you don’t have a service plan, it’s best to check with the dealership to see what the average cost of a service is on your car will be. Factor in the hourly rate of the technicians, the cost of consumables like oil, and the average price of replacement parts. 

Kriben Reddy, Vice President of Auto Information Solutions at TransUnion Africa, says that one of the major additional costs to owning a car is the cost of fuel. “Whether it is diesel or petrol, fuel is an ongoing cost that fluctuates in line with inflation and one you will have to carry for as long as you have a car,” he says.

Tyres can be surprisingly expensive, too. A decent set of tyres should last around 40 000km if they’re well-maintained, but there’s no accounting for emergencies. On average, a 13-inch tyre can cost around R800 while 16-inch tyres can average around R2 124 each.

Don’t forget to factor in the cost of your annual license renewal – pricing in Gauteng in 2020 ran from R432 for a small 1 000kg vehicle like a Kia Picanto to R1 728 for SUVs up to 3 250kg.

Check out our South African Car Guide to give you all the details on everything from insurance to renting and purchasing the car you want, in one place.

This article is for informational purposes only and should not be construed as financial, legal or medical advice.