The True Cost of Car Ownership in 2023
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.
|Deposit||Term||Residual Value||Monthly Repayment||Vehicle Finance Required||Total Interest & Service Fees|
|15% (R30 000)||36 months||0||R5 513||R171 207||R32 273|
|10% (R20 000)||54 months||0||R4 162||R181 207||R43 560|
|10% (R20 000)||72 months||0||R3 335||R181 207||R58 938|
|0%||54 months||30% (R60 000)||R3 709||R201 207||R59 067|
|0%||72 months||0||R3 696||R201 207||R64 895|
|0%||72 months||30% (R60 000)||R3 064||R201 207||R79 424.91|
Insurance is not as 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.
- 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.
- Third-party, theft, and fire insurance: It covers hijacking, theft, and injury you cause to others, and damage to others’ property in an accident.
- 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.