When taking all these expenses into account, the total cost of ownership of a mid-size hatchback totals R9 500, which is substantially more than the R5 500 monthly instalment. This basic sum highlights how the total cost of ownership can be as much as double the repayment cost.

When shopping for a new or pre-owned car it is important for consumers to remember that the total cost of owning a car extends far beyond just the purchase price. It is critical that motorists have a complete understanding of all the costs involved with owning a particular car and that they avoid basing their decision only on the price on the windscreen or the monthly instalment.

Considering the total cost of ownership is particularly important in a price sensitive market like South Africa, where most motorists shop on price.

Monthly repayments

Considering a mid-range hatchback priced at R300 000, consumers can expect to pay a monthly instalment of around R5 500 per month, depending on the interest rate linked to the finance agreement. Interest rates vary depending on factors such as credit score and the loan period. If a vehicle is financed with a residual value, motorists need to keep in mind that they will still be liable for that remaining percentage at the end of the contract period.

Calculate the monthly repayment on your dream car here

Insurance

If you are financing a vehicle, the finance agreement will mandate fully comprehensive insurance cover which protects owners, and the financial institution that is granting you finance, against loss due to theft or damage resulting from an accident.

Insurance premiums vary depending on a wide range of factors including location, where the vehicle is parked during the day and at night, driver age, claim history and of course make and model. For a R300 000 hatchback a monthly insurance payment of around R1500 can be expected.

High risk models will attract a higher insurance premium, and it pays to do your research and obtain insurance quotes on the models on your short list before making a final decision. A saving of a few hundred rands a month on insurance could have a big effect on the total cost of ownership over a period of a few years.

Fuel costs

South Africa suffers from one of the highest fuel prices on the continent and fuel is one of the biggest operating expenses of owning a car. Monthly fuel costs can be calculated by taking into account the vehicles fuel consumption and the average monthly distance travelled. An average sized hatchback will use around 7,0 litres per 100km, which equates to approximately R1.50 per kilometre. So if you drive an average of 1250km per month (or 15 000km per year) your fuel costs will be around R2000 per month.

Motorists who are on a tight budget should rather shop for vehicles with a lower fuel consumption as this can have a massive effect on the total cost over a few years of ownership.

Calculate your dreams cars fuel efficiency here

General maintenance

To ensure that your car remains in a safe and reliable condition, regular servicing and maintenance is required. While many new cars these days are sold with a service plan, which covers service costs for the first few years, this is not always the case. Cars need to be serviced once a year or every 15000km and this only includes the basics such as oil and filters. Motorists also need to factor in additional maintenance costs, such as tyres. Maintenance costs will also increase as the car gets older and larger components need replacing. Owners of a mid-range hatchback can expect to pay around R6000 per year or R500 per month in service and maintenance costs. Motorists also need to budget for yearly licencing costs of around R750.

Total cost of ownership

When taking all these expenses into account, the total cost of ownership of a mid-size hatchback totals R9 500, which is substantially more than the R5 500 monthly instalment. This basic sum highlights how the total cost of ownership can be as much as double the repayment cost. Motorists also need to remember that this cost will rise with every kilometre driven as fuel and maintenance costs are directly proportional to mileage driven.

This total cost of ownership amount highlights the need to objectively and honestly evaluate one’s affordability before signing a vehicle finance contract. It also shows how certain factors like fuel consumption and the model chosen can have a massive effect on the total cost of ownership.

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