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Consumers’ budgets are strained and under pressure in all departments. The first four months of this year have already brought two interest rate hikes, with a possible third increase expected at the next Monetary Policy meeting towards the end of May. These, together with an escalation in food and fuel prices, load-shedding, unemployment and higher consumer inflation, are severely impacting many households’ monthly budgets.
According to Stats SA (April 2023), headline consumer inflation edged higher to 7,1% in March, from 7,0% in February and 6,9% in January, with food and transport costs among the main drivers behind the monthly increases. Another increase in the repo rate would again negatively affect home and vehicle owners, especially in an economic climate where fuel, electricity and living expenses are also on the rise.
An interest rate increase directly impacts people who are paying off loans such as vehicle finance or a home loan linked to the interest rate, as the monthly repayment increases. In a weakened economy with slower inflation, a high cost of living and increasing food prices, many South Africans are struggling to stretch their already constrained budgets to reach month end.
“An interest rate hike has a ripple effect across all sectors of the economy. Our customers are not unaffected by this higher cost of borrowing either, particularly those customers who have opted for a linked rate as their monthly car repayments will increase,” comments Lebogang Gaoaketse, Head of Marketing and Communication at WesBank.
“It is also important to remember that the total cost of vehicle ownership is more than the initial price tag of the vehicle. You also need to account for the monthly repayments plus the added costs of fuel, comprehensive insurance cover, and general maintenance and service expenses – plus the possibility of another interest rate hike that will directly impact consumers’ monthly budgets.”
To understand what the total cost of vehicle ownership is, there is no one-size-fits-all solution as each finance deal is unique. However, knowing how much you can realistically afford on the vehicle repayment, including interest rate increases and other costs, will stand you in good stead. The cost of owning, maintaining, and keeping a safe vehicle on the road is an ongoing cost that requires careful planning and budgeting.
All these costs mean that affordability becomes a key consideration in the purchasing decision. “This has resulted in the introduction of new brands focused on more affordable models, together with new entry-level options from established brands,” Gaoaketse continues. “These options enable customers to tackle affordability at a lower price point to lower their monthly expenses if they want to own a new car. However, a good used car is also an excellent option when it comes down to vehicle price and affordability.”
The following table analyses and illustrates the total cost of vehicle ownership over the past five years from 2019 to May 2023. The figures indicate that a vehicle owner in May 2023 is now paying on average R3,776 more per month than in 2019 for the total mobility costs.
| Year | Monthly Net Instalment Due | Monthly Fuel Cost | Monthly Insurance | Monthly Running Cost | Total Mobility Cost * |
| 2019 | R 3,564.77 | R 2,731.75 | R 1,187.91 | R 366.97 | R 7,851.39 |
| 2020 | R 3,433.06 | R 2,565.50 | R 1,235.43 | R 349.77 | R 7,583.76 |
| 2021 | R 3,438.11 | R 2,646.00 | R 1,273.73 | R 358.10 | R 7,715.94 |
| 2022 | R 3,779.28 | R 3,780.00 | R 1,322.13 | R 475.39 | R 9,356.80 |
| 2022 (Nov) | R 4,313.10 | R 3,949.75 | R 1,409.26 | R 492.94 | R 10,165.05 |
| 2023 | R 4,904.16 | R 3,902.50 | R 1,580.45 | R 488.06 | R 10,875.17 |
| 2023 (May) | R 5,366.16 | R 4,021.50 | R 1,739.74 | R 500.36 | R 11,627.76 |
* It is important to note that this monthly total cost of vehicle ownership table is based on data that constantly shifts in relation to market activity and is thus intended as a guideline only.
For the purpose of this exercise, we have taken an average vehicle (approx. R280,000) that travels approximately 2,500 kilometres per month. The monthly cost of the vehicle ownership basket, comprising of instalments, fuel, insurance, and maintenance costs, has increased to R11,628 in May 2023 from R10,165 in November 2022, with the biggest increases in monthly repayments due to the ongoing interest rate hikes. and insurance fees. While this reflects a percentage increase of 14% for the period November 2022 to May 2023, the May 2023 average figure is 48% higher than in 2019 when the monthly mobility cost averaged R7,851.
In 2023, to May, vehicle instalments and fuel spend remain the largest portions of the basket, accounting for 81% of the monthly spend. Fuel spend accounts for 35% of the total with the vehicle instalment at 46%, a result of the spate of interest rate hikes over the past year. The monthly insurance cost of R1,740 makes up 15% of the cost, with running costs per month accounting for the final 4% at R493.
The percentage breakdowns remain similar to those in 2019, where fuel spend also accounted for 35% of the total at R2,732, while the average vehicle instalment was 45% at R3,565. A similar pattern has emerged over the past four years. This year’s figures indicate that fuel spend, and vehicle instalment costs will again have a similar weighting as in the previous years, at 35% and 46% respectively – an indication of the interest rate increases motorists have been subjected to recently.
The figures up to May 2023 are further evidence of the wide-reaching impact of both global and local influences on the total cost of vehicle ownership such as the war in Ukraine and chip shortages affecting production. These costs are reflected in the WesBank Finance Calculator, a tool that tracks and calculates motoring expenses. The total basket of costs comprises all the fees associated with vehicle ownership: the monthly instalment, comprehensive insurance premium, fuel costs and maintenance fees. These expenses are updated regularly to reflect current inflation and interest rates, the current petrol price and other fluctuating costs.
“It is important to remember that the monthly vehicle ownership basket figure is based on data that constantly shifts in relation to market activity and is thus intended as a guideline only. The economic impact of COVID-19 created an anomaly in relation to the 2019 data and should also be taken into consideration when comparing the 2023 figure, in relation to 2021 and 2022,” comments Gaoaketse.
“Prospective vehicle owners should take a holistic view when planning a car purchase by right-sizing the spend to fit their budget to ensure they don’t overextend themselves. This includes making allowances for increased costs down the line, such as another interest rate hike or higher fuel prices. The smartest move is to make provision for these rising costs over the duration of the finance contract. Utilising a tool such as the WesBank calculator makes financial sense and is there to assist consumers to gauge the total costs associated with their vehicle ownership,” concludes Gaoaketse.
