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How much does it really cost you to buy a car?

by | Feb 10, 2022

Ernest North, co-founder of Naked Insurance, recommends that before you decide to buy a car, you take into account all of the costs that come along with owning a vehicle.

How much does it really cost you to buy a car?Buying a car is exciting, whether it’s a brand new model or a preowned beauty you fell in love with after a test drive.

But, before you sign the papers and take possession of your new wheels, it’s wise to think carefully about what the new car will mean for your personal finances.

Even the most modest vehicle comes with a range of ongoing costs that will be with you far longer than that wonderful new-car smell.

There are two questions you should ask yourself before deciding whether or not to buy a car:

  1. Can I afford the monthly costs of the car I want to buy?
  2. Is this really the wisest way for me to spend my money?

The first question considers your cashflow: do you have enough to meet all the monthly costs? The second question is about your long-term financial position and comparing this car to your other options, such as using Uber or public transport, or cycling.

How to work out if you can afford a car

Step 1: Evaluate your needs and the cars you might buy

The first step is to decide which car to buy. Do you want a 4X4 for your holidays in the bush? A hatchback for school runs and shopping? A luxury sedan because you do long commutes and lots of work travel?

From here, you can browse online marketplaces and test-drive cars at dealers to find the right one for you. Your ultimate choice might be the 2020 VW Polo TSI Comfortline (automatic). At the time of writing, this Polo was going for roughly R300 000.

Step 2: Find out what the monthly car repayment will be

You can skip this step if you’re paying cash. Most people, however, will need financing to buy a car at this price. The monthly repayment will be determined by the interest rate you pay as well as the number of months over which you repay the loan.

A R300 000 car repaid over five years will cost you around R6 500 a month at the current interest rate (depending on the size of any deposit you’re able to put down up front). The longer the loan term, the more interest you will end up paying.

This calculator by AutoTrader can give you more insight.

Step 3: Estimate fuel costs

You can work out your approximate petrol bill by considering how many kilometres you drive each month. Then, look for information about your vehicle’s fuel consumption. How many kilometres can you get on a litre of fuel?

If your car’s fuel consumption is just under 20 kilometres per litre and petrol costs close to R20 a litre, it will cost you around R1 000 a month to travel 1 000 kilometres.

Step 4: Get insurance quotes

If you need to get a loan to buy a car, the lender will insist that you get comprehensive car insurance. Even if you are not getting a loan, insurance is essential to protect yourself from loss and liability.

Get a few quotes to ensure you’re getting the best possible price. For now, let’s estimate your insurance premium on the Polo is R750 per month.

Step 5: Budget for repairs

One of the benefits of buying new is that it will usually include a maintenance plan that will cover most of the routine things done in your service.

However, you’ll still need to budget for expendables like brake pads, windscreen wipers and tyres. This usually averages roughly 2% of the car’s value each year, or about R6 000 for your R300 000 car.

You should also allocate some money for nastier surprises like a snapped cambelt or a new clutch – perhaps 5% of its value per year, or R15 000 for our Polo.

If you don’t have a service plan, you can plan on spending an extra R5 000-R10 000 per service. How much it will cost you will be influenced by the age of the vehicle and how much you drive.

The total cost

Adding up all of these costs, you would need a car budget of about R10 000 a month to own and drive a R300 000 car.

Car expenses table

So, you can afford to buy a car – but should you?

Over five years, these costs will stack up to R600 000.

We estimate that once your car is paid off in five years’ time, it will be worth around R165 000. That means that the total amount you paid for your full cost of owning the car will be R435,000 – or R238 per day.

Most of us need to get around, so the next question is whether it’s better to Uber or buy a car.

Depending on your lifestyle and where you live, you also have choices like cycling or using the Gautrain or MyCiTi bus.

Your other options include buying a slightly less expensive vehicle, especially if that means you can pay cash for your car. You can then put the monthly difference in retirement funding or a savings account.

It’s also worth thinking carefully about the costs and how much you value the flexibility and freedom of car ownership before deciding whether to get a new car or do without.

Whatever you decide, buying a car is a major commitment, and only you will know whether it’s the optimal choice for you from a financial and lifestyle perspective.

This post was based on a press release issued on behalf of Naked, a fully digital insurance platform.


  1. I found this article/advice very helpful and nerve-calming because I have just purchased a vehicle, literally, yesterday. So, I decided to read my contract carefully even though I had already signed it. I can certainly afford as I had done my homework ahead of the purchase. However, I was just concerned that I could not thoroughly read the contract in advanced even though I had asked for it from the dealer. The contract with the bank (the financier) was downloaded only when I was already there to collect the vehicle, apparently because of an earlier ‘system failure’ (the usual “network was down” story) at the bank, hence it could not be sent in advanced. The bank had already accepted my application, but it was the contract that was remaining, basically a final hurdle.
    Your article, therefore, made me understand the contract I entered into with the financier and the monies that I signed up for (particularly, the monthly instalments; the interest and the interest rate). It has also made me understand and calculated how much extra would I have to put in my monthly instalment if I have to dispense with the debt in about 4 years (48 months), which will be my target.
    However, perhaps even my question, I am not sure which debt to prioritise for shortening faster, between the vehicle and my house bond. I purchased the vehicle for R282 000 while the house bond is now R497 000.

    • I am so glad the article was useful. I am concerned about the type of tactics where you were not able to review the contract in your own time.
      If you have no other short-term debt then you could focus on the car as it is a depreciating asset and probably a higher interest rate than your home


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Maya Fisher-French author of Money Questions Answered

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