Thinking beyond the monthly instalment when shopping for your next car

Before committing to vehicle finance, buyers need to consider several key factors which often get lost in the excitement of shopping for a new set of wheels.

When shopping for a new car many South Africans tend to get fixated on one number, the monthly instalment. If it fits their current budget they feel like the vehicle is affordable.

However only considering the monthly instalment is a narrow view that can cause shoppers to overlook the critical financial considerations that contribute to determining whether car ownership remains sustainable across the contract period or becomes a source of long-term financial pressure.

When consumers take the time to understand the full financial commitment, ask the right questions and properly stress-test affordability, they place themselves in a far stronger position for comfortable ownership.

Before committing to vehicle finance, buyers need to consider several key factors which often get lost in the excitement of shopping for a new set of wheels.

What happens if circumstances change?

Life is full of surprises. Career changes, the arrival of a child, unexpected medical or household expenses can have a way of placing unplanned stress on monthly budgets and impacting motorists’ ability to meet monthly repayments. This is why it is important to carefully consider affordability against possible changes in income or expenses. Ask yourself if you will be able to manage repayments if your income was reduced by 20% or if your monthly expenses increased unexpectedly.

What protection do you have in place if you are unable to work?

The contract term of vehicle finance agreements can be anything between three and six years and a lot can change during that time. Illness, retrenchment or other life events may disrupt your income. Safe guards such as credit life insurance, payment relief options or other provisions can provide essential peace of mind. This type of financial protection may seem unnecessary when your finances are stable but can become valuable should your circumstances change.

Understanding the true cost of ownership

The purchase price and monthly instalment is only one part of the vehicle ownership costs. Insurance premiums, fuel costs, maintenance, interest rate increases and depreciation all affect affordability over time. A vehicle with a R5 000 monthly instalment can easily cost R7 500 per month once all the ownership costs have been added up. Failing to account for all these expenses can quickly place sustained pressure on monthly budgets and household finances.

How does a deposit impact long-term risk

A larger deposit reduces the amount financed, lowers monthly repayments and decreases the total interest paid over the loan term. It also offers protection against early depreciation as owing more on a vehicle than its market value can create vulnerability if the vehicle needs to be sold after a few months.

Financial experts recommend that total vehicle related expenses should not exceed 15% to 20% of gross monthly income, which is a great benchmark to calculate affordability against.

Beware of deals that prioritise a low monthly instalment

South Africa’s vehicle finance market has evolved to offer a variety of repayment structures, such as leasing options and repayment deals with a significant balloon payment component. Many of these are designed to reduce the monthly repayment and make vehicles more affordable on a monthly basis but can end up costing significantly more in the long run.

Ask about flexibility

A level of flexibility can be beneficial, and consumers should ask what flexibility exists if they need to restructure payments, whether early settlement penalties apply, what happens if the vehicle is written off and whether there are options available that reduce monthly commitments if needed.

Do your homework

As always it is important to do your homework and carefully calculate how much the vehicle will actually cost you on a monthly basis and across the entire contract period. When approached thoughtfully vehicle finance can offer real value, enabling access to reliable transport while preserving capital for other expenses. The key is to treat it as a long-term financial commitment and not just a monthly expense. Focusing beyond whether this month’s instalment fits this month’s budget will allow consumers to make the best decision in the long run. Motus Select offer handy online calculators that can assist with calculating monthly instalments as well as vehicle affordability, allowing shoppers to have a better idea of what they can afford before they start their new vehicle search.