You are Here > Home > Budgeting > Rising costs of car ownership

Rising costs of car ownership

Apr 13, 2013

With steep increases in the price of petrol, the running costs of your car could be as much as your monthly instalment.

cars in trafficLast month South African motorists faced the largest ever petrol price increase with the cost of petrol increasing by a massive 81c per litre. The cost of a tank of petrol increased by R40 for the average car; it now costs the average motorist around R1 for every kilometre they drive. Every kilometre now counts and owning a car is becoming increasingly more expensive – taking a bigger bite out of our budgets.

Rudolf Mahoney of WesBank warns that motorists, especially first-time buyers, need to fully understand the cost of running a car.

Mahoney says even financially savvy consumers can get caught out by the high cost of fuel in the current economic cycle. “The extremely low interest rates are, to some extent, subsidising the high fuel prices. We foresee interest rates starting to increase from next year. The combination of extremely high fuel prices as well as increasing interest rates (on all credit transactions) will have a significant impact on the consumer’s disposable income,” says Mahoney, who adds that this does not even take the possibility of e-tolling into account. Given the possibility of interest rates increasing, Mahoney says 75% of all customers who are buying cars are opting to fix their interest rates.

When buying a car, you need to factor in the total monthly running costs. The total mobility costs of owning and operating a car include the finance repayment, fuel, maintenance, insurance and – almost certainly – e-tolling in the near future.

Mahoney says a rule of thumb when buying a car is that if your instalment works out to, for example, R3000, then you should budget another R3000 per month for fuel, insurance and maintenance. This may vary depending on your monthly mileage.

A finance agreement for a new car is, in general, a five-year agreement. A lot can change in this time.  In March 2009, the price of a litre of 93 unleaded petrol (inland) cost R6.88 versus R12.88 today. Furthermore, five years ago we could also not have foreseen the prospect of e-tolling on the main highways around Johannesburg. Buying a new car should be a practical endeavour. It is therefore advisable not to over-extend your finances, and to always leave yourself with a healthy buffer in order to accommodate the uncertainties of the future.

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

Maya Fisher-French author of Money Questions Answered

Previous Articles

E-cigarettes and your life insurance policy

Clyde Parsons, Actuarial Executive at BrightRock, explains why regular users of e-cigarettes are charged smoker rates by life insurers, and what you can do about it. For decades now, we’ve known that smoking is bad for our health – the research has conclusively shown...

Listen: Creating a passive income with shares

In this podcast, Maya (@mayaonmoney) chats to money blogger Brett (@ETFenthusiast) on how blogging helps keep him on track financially, his plans in working towards financial freedom, and which investments he is using to provide a passive income in the future.

You don’t need a lot of money to start investing

Many people feel they need to have a lot of money in order to start investing. In fact, the opposite is true. Investing small amounts every month actually provides the best risk-return scenario when it comes to longer-term investing. Investing via a monthly debit...

Beware the unpaid CGT shock

Many taxpayers may not be aware that the payment of capital gains tax (CGT) is due before you receive your investment tax certificates. This affects existing provisional taxpayers as well as any resident taxpayer who disposes of an asset and earns a capital gain or...

Teach your kids the value of money

The best financial legacy you can leave your children is to teach them the value of money - how to save it as well as how to spend it, says Stephen Katzenellenbogen, Senior Executive and Wealth Manager at NFB Wealth Management. You don’t have to wait until you die to...

How will the recent looting affect the rand?

Bianca Botes, Director at Foreign Exchange Specialists Citadel Global, shares her insights on the recent protests and looting, and what it might mean for the value of the rand. One cannot deny the chaos that has ensued since the recent incarceration of former South...

Listen: It’s tax time: here’s what you need to know

Tax filing season opened on 1 July, and non-provisional taxpayers have until 23 November to file their returns. Some people look forward to tax season because they can get a rebate, but for many of us it can feel a bit overwhelming. A particular hot topic this year is...

Tips for expats to get tax ready

Tanya Tosen, Master Mobility Specialist at Tax Consulting SA, has some tips for expats to make sure they have all their ducks in a row when it's time to file their tax return. Adding to the challenges of 2020, the South African Revenue Services (SARS) announced that...

Make the right choices from the start

The great thing about getting your first paycheque is that you have the opportunity to do the right things before the bad habits kick in. The day that first paycheque hits your bank account you feel like you have finally arrived. But how you manage that money will...

Are banks putting customers first?

Banks were in the spotlight recently with the release of the annual report by the Ombudsman for Banking Services (OBS) and feedback from the Financial Sector Conduct Authority (FSCA) regarding the banks’ adherence to the Conduct Standard. The draft Conduct Standard...

Pin It on Pinterest

Share This