Monthly vehicle ownership costs include a whole lot more than just the monthly repayment. Factors such as insurance, fuel and maintenance need to form part of any total cost of ownership calculation and could be more than you expect.

When shopping for or purchasing a car, many consumers focus only on the purchase price, but in order to make an informed decision, motorists need to consider all the costs associated with vehicle ownership.

In addition to the vehicle’s price tag, additional costs of vehicle ownership include depreciation, loan interest, insurance, fuel, maintenance and repairs.

All these expenses need to form part of your budget when deciding on a new car in order to avoid any potential financial difficulties associated with the purchase.

Insurance

If your vehicle is purchased by means of a financing agreement, the lender will require that you have comprehensive car insurance in place. Monthly insurance premiums are determined based on a variety of factors including the vehicles make and model as well as driver history, age and the location where the vehicle is used and parked.

Fuel

Fuel costs are a major monthly cost and are dependent on your car’s fuel consumption and the distance travelled and of course the ever-fluctuating fuel price. A good rule of thumb is between two and three rands per kilometre. Before deciding on your next vehicle, do some research around its fuel consumption. Using a vehicles fuel consumption figure and the amount of mileage you expect to drive per month, will allow you to get an idea of how much you will be spending on fuel.

Maintenance

Vehicle maintenance includes everything from servicing to repairs as well as maintenance items such as tyres, wiper blades and brake pads. Regular servicing is important for a variety of reasons, including maintaining your vehicles warranty and also ensuring that it remains reliable and roadworthy. Most new cars are sold with a service or maintenance plan that makes up a portion of the purchase price and these plans will cover owners for servicing and in some cases certain maintenance items. The validity of these plans are normally time and mileage based. If you are in the market for a pre-owned car, it is important to determine for how long this cover is still valid. Once this cover expires maintenance costs will be for your own account.

As a general rule of thumb, more expensive cars will be more expensive to maintain as their parts are more expensive and they will normally use larger tyres that are also more expensive to replace.

Even if your vehicle has a service plan in place, it is important to budget for consumables such as brake pads, wiper blades and tyres and these maintenance items will cost approximately 2% of the vehicles value per year.

Depreciation

Vehicles lose value over time, and this cost that needs to form part of your total cost of ownership calculation as it will allow you to determine what your vehicle will be worth after a certain period of time. Vehicles typically lose between 10 and 20% of their value per year and this factor is dependent on things like vehicle make, model and average yearly mileage. As a general rule of thumb, popular cars like a Toyota Hilux or Volkswagen Polo will depreciate at a slower rate than more niche models such as Volvo’s and Subarus as the more popular models will always be in demand in the pre-owned market, which drives up their value.

Admin fees

Purchasing a vehicle will require the payment of once-off costs such as registration fees and licensing. In addition annual licensing costs will need to be factored into your budget and can range between R500 and R1000 per year depending on the size of the vehicle.

Cars can cost double their monthly repayment costs

Taking all these factors into account can see motorists spend at least double the amount of their monthly instalment on total monthly costs. For example a vehicle with a R5000 monthly repayment will cost you around R10 000 per month once all the costs mentioned have been tallied up.

It is important for motorists to realise that owning a vehicle costs a whole lot more than just the purchase price or monthly instalment. It is imperative that buyers do their research and get quotes on items such as insurance before deciding on their next car. By understanding the full cost of ownership buyers will be better informed to make financial decisions and maintain a more predictable budget.