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Car instalments up 43.8% over five years

Jul 21 2017 18:26

Cape Town - New data from WesBank shows that the overall cost of motoring is still on the rise, despite recent cuts to interest rates and fuel prices, as well as a slowdown in vehicle price inflation.

The monthly mobility basket – instalments, fuel, insurance and maintenance fees – has increased 24.2% since July 2013, Wesbank said on Friday.

The SA Reserve Bank (SARB) cut the repo rate by 25 basis points on Thursday.

"Consumers with vehicle finance, home loans, and credit cards will have more disposable income, as instalments become more affordable. However, July’s lower fuel prices are forecast to be short-lived," said Rudolf Mahoney, head of brand and communications at WesBank.

"Despite this month’s fuel prices being lower than they were during July last year, stronger oil prices and a weaker rand mean an increase is on the cards for August."

WesBank's Mobility Calculator tracks monthly instalments, fuel, insurance, and maintenance fees. For example, an entry-level car that cost R100 000 in 2007, would cost more than R183 000 today – and the associated costs have also increased.

For July 2017, the WesBank Mobility Calculator reflects that the average cost of motoring has risen to R7 119.80. This is 6.1% higher than July last year, when the monthly mobility basket was R6 709.53.

Compared to five years ago, the total cost of motoring is now 24.2% higher. In July 2013, monthly costs amounted to R5 732.64.

READ: Junk status still denting new car sales

Vehicle instalments and fuel remain the biggest portions of the monthly mobility basket. However, insurance premiums, vehicle instalments, and maintenance costs account for the highest increases over the last five years – mainly as a result of vehicle price inflation.

From 2013 to 2017 rising interest rates and higher new vehicle prices saw instalments increase 43.8%. Rising vehicle prices also resulted in higher insurance premiums, which grew 38.6% over the same period.

In June, the average new vehicle financed through WesBank cost R300 181, while the average used vehicle cost R202 796.

Data from TransUnion suggests that new vehicle price inflation is slowing down, yet the effects of this won’t be seen immediately in vehicle sales figures, according to Wesbank.

"Fluctuating fuel prices are one of the reasons that consumers should not base their entire motoring budgets on fuel spend. Instead, motorists should take a longer-term view when planning a car purchase, and ensure that their budgets are able to absorb higher maintenance costs and insurance premiums four to five years down the line," said Mahoney.

“Interest rate cuts and lower fuel costs are always welcome, but this shouldn’t influence a vehicle purchase. The smartest move is to plan for rising costs over the duration of your finance contract and take advantage of price cuts when they happen.”

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