So, you’re looking to buy a new car. Perhaps you’ve negotiated for the perfect deal or just saved up the right amount to pay the deposit. Unfortunately, the purchase price is only the beginning. There are many hidden costs of buying a car in South Africa that can add up over time.
Before you buy a car, it’s important to understand all these costs, from your first payment to ongoing monthly costs and unexpected future expenses. This will help you budget well to avoid financial surprises.
Initial costs
Owning a car begins with a few upfront expenses. These costs are often the first hurdle for buyers and include more than just the price of the car. Let’s take a look at what you need to budget for before driving off in your new car for the first time.
Purchase price
The most obvious cost when buying a car is the purchase price. This is the amount you pay to buy your car, whether new or used. This will be your biggest expense and, depending on the agreement with your financier, is typically paid off monthly over a few years.
The purchase price may depend on the make, model, and condition of the car. Remember that the higher the total cost, the more you’ll have to pay for your car every month. So, it’s important to find a car that’s well within your budget.
Add-ons or additional features
Many cars have optional add-ons or features, such as upgraded sound systems, leather seats, or advanced safety features. While these can greatly improve your driving experience, they can also increase the total cost of the car by a significant amount. Ask yourself whether these extras align with your needs and budget before you ask for them.
Deposit
When buying a car, you often need to pay a deposit. This upfront payment lowers the amount you need to finance and can also lower your monthly instalments. A larger deposit typically means lower monthly payments, but first, make sure you have enough savings to cover this deposit amount without putting a strain on your finances.
Licensing and registration
After buying a car, you’ll need to pay for licensing and registration. These fees are necessary for legal road use and depend on the type of car and the area where you live. Find out beforehand how much you’ll need to pay to register your car and add these costs to your budget to avoid any surprises.
Monthly expenses
Once you’ve bought your car, you’ll need to pay the ongoing monthly expenses. Knowing what they are will help you estimate the regular financial commitment of owning a car so you can comfortably make these payments.
Monthly instalments
If you’re financing your car purchase, you’ll have monthly instalments you’ll need to pay. These are calculated based on the car’s purchase price, the deposit, and the loan term. Make sure these payments fit comfortably within your monthly budget to avoid negatively affecting your finances.
Interest rates
Interest rates on car loans can significantly impact the total cost of your car. Higher rates lead to higher monthly payments and more money spent over time. Shop around for the best rates and consider how they’ll affect your overall budget.
Insurance costs
Car insurance is another essential ongoing expense. Your insurance premiums, or the amount you’ll have to pay your insurer monthly, depend on factors like your driving history, the type of car, and coverage plan. You’ll also need to budget for an excess fee in case you need to claim.
If you’re financing your car, a comprehensive car insurance plan to cover your car is often required. Prime South Africa’s Comprehensive car insurance plan offers you the right balance between coverage amount and affordability for peace of mind.
Maintenance and service costs
Keeping your car in good condition involves both routine maintenance and unexpected repairs. Let’s look at the potential costs of servicing without a plan and what to expect if repairs are needed outside of warranty coverage.
Service plans
A service plan typically covers routine services such as oil changes, filter replacements, and general inspections. It can be included in the total purchase amount when you buy your car. Without a service plan, you’ll need to budget to pay for every service out of pocket at least once a year.
Maintenance plans
A maintenance plan is different from a service plan in that it covers wear and tear on top of general servicing. These plans can be a good investment if you want to avoid surprise repair costs. However, they come with an added cost, so think about whether they fit your budget and driving needs.
Out of warranty service and maintenance
Once your car’s warranty expires, you’ll be responsible for all maintenance and repair costs and for getting your car serviced yearly. These costs depend on the vehicle’s make and model. Regular maintenance helps to prevent major issues, but it’s best to set aside a budget for any repairs that may become necessary.
Additional costs to budget for
If you’re looking to become a car owner, there are other costs you may not have thought of. They can quickly add up over time, so let’s look at what they are to help you plan better.
Toll fees
If you often drive on toll roads, the toll fees can significantly add to your monthly cost. It’s a good idea to work out how often you’ll encounter tolls and factor this cost into your budget.
Fuel costs
Fuel costs are an ongoing expense that can fluctuate based on fuel prices and your driving habits. Keep track of your fuel consumption and budget accordingly to manage these costs effectively. Efficient driving practices can help you lower your fuel usage.
Balloon payment lump sum
Some car finance agreements include a balloon payment, which lowers your monthly repayment amount but requires a large lump sum paid at the end of the loan term. This can be a large expense, so you’ll need to plan ahead to make sure you can afford it when it becomes due.
Hidden costs over time
Car ownership also involves hidden costs that can impact your finances over the long term. Let’s look at some of them to help you plan better for the future.
Depreciation
One of the most significant hidden costs is depreciation. As soon as you drive your new car off the dealership showroom, its value starts to decrease. This can affect your car’s resale value and should be carefully considered when buying a new car. Otherwise, buying a used car might be a more affordable option.
Interest hikes
Interest rates can change due to decisions made by the South African Reserve Bank. If your car finance is linked to the prime rate, an increase in interest rates could raise your monthly repayment amount. Keep updated on economic changes that may affect your car finance.
Unexpected repairs
Unexpected repairs can be a major expense, especially if your car is outside the warranty period. Setting aside an emergency fund for these costs can help you cover these costs and avoid being caught off guard.
Make sure you can afford your car
Buying a car is saying yes to more than just the purchase price. By understanding and planning for all the hidden costs – such as monthly instalments, interest rates, insurance, maintenance, and unexpected repairs – you can better manage your budget and enjoy your car free of financial stress.
Disclaimer
This article provides general information on the hidden costs associated with buying a car in South Africa. Always read each policy carefully before purchasing any car insurance cover.
Buying car insurance should be done with much thought and only from a certified financial services provider.
Contact us today to learn more about getting affordable, comprehensive car insurance with fixed premiums* and a reduce-to-zero excess*. *T&Cs apply.
