The True Cost of Car Ownership in 2021

The True Cost of Car Ownership

You don’t simply run a car on the price that is monthly paid. There are other important things attached to the monthly installments to think carefully about.

The price of a car listed by any dealer looks so different when one takes additional cost into account. Head: Strategy & Business Analytics, Absa Vehicle & Asset Finance, Henry Botha says that people mostly overlook the true cost of car ownership concerning affordability.

How much additional price is paid in monthly car loan installments?

One’s apprehension of the affordability scenarios which are based on vehicle price is the decisive element. We can look at various factors which affect monthly installment while purchasing a car of worth R200, 000. When service fees and total interest is added to the actual amount (R200, 000) then the true cost of car ownership emerges.

It is conceivable that if someone wants to pay little interest then paying the deposit in advance is the best strategy. The amount that vehicle financing requires is then lowered down but it increases monthly premiums. For those who don’t want to pay too much every month, the extension of the loan period should be their best choice. But loan period extension makes the total amount of interest increased.

DepositTermResidual ValueMonthly RepaymentVehicle Finance RequiredTotal Interest & Service Fees
15% (R30 000)36 months0R5 513R171 207R32 273
10% (R20 000)54 months0R4 162R181 207R43 560
10% (R20 000)72 months0R3 335R181 207R58 938
0%54 months30% (R60 000)R3 709R201 207R59 067
0%72 months0R3 696R201 207R64 895
0%72 months30% (R60 000)R3 064R201 207R79 424.91

Insurance is not that simple that one could imagine

King Price’s Client Experience Partner, Wynand van Vuuren mentions different kinds of car insurance with various levels of cover and different costs.

  1. Comprehensive insurance: It covers all sorts of damages e.g. car damage by robbery, hijacking, accident, and damages caused to other vehicles, and even destruction of a car.
  2. Third-party, theft, and fire insurance: It covers hijacking, theft, and injury you cause to others, and damage to others’ property in an accident.
  3. Third-party, simple insurance: It covers only those injuries that you cause to other people or their property in an accident.

Maintenance and service plans

Car maintenance gets expensive if you don’t know what is covered in the service plan including parts fixing and replacement. You should know the limits i.e. time (e.g. 1 year) or kilometers covered and cost of service mentioned in a motor maintenance plan.

Your service plan can rightly make you understand the average cost of car service i.e. technicians’ hourly rate, rates of oil, and replacement parts’ average prices.

Fuel factor is an additional cost to owning a car and the cost of tyres depends on the quality and good tyres last around 40, 000 km. The cost of annual license renewal is another important factor that one cannot forget.

By delving into the factors mentioned above one can easily understand the true cost of car ownership in 2021.

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