The Covid-19 pandemic has affected the global way of living in many ways. One of it’s more positive implications for consumers in South Africa is the current interest rate that’s sitting at a record low.
If you calculate the monthly expenses of the vehicle ownership basket, comprising of finance repayments, petrol, insurance premiums and maintenance costs – and then associate it with an average entry-level car that travels approximately 2,500 kilometres per month – you’ll find a decrease from R7,851 in 2019 to R7,584 in 2020. This decrease is a result of interest rates dropping and reduced fuel consumption.
It’s important to note that this monthly vehicle ownership basket figure is based on data that’s constantly shifting and is intended as a guideline only.
However, despite this record-breaking interest rate, vehicle owners are still battling to keep up with vehicle finance payments. In a recent interview, Lebogang Gaoaketse, WesBank Motor head of Marketing and Communication, said that interest rate savings have simply been negated with other financial strains incurred by the country’s fluctuating lockdown levels.
Gaoaketse reminds consumers that the cost of vehicle ownership needs to be managed within a total monthly household budget.
Gaoaketse goes on to emphasise that even vehicles that are driven infrequently can incur fixed monthly expenses, such as vehicle finance repayments and car insurance premiums.
The bad news for South Africans is that despite reduced interest rates, vehicle prices in the country continue to rise. This after the TransUnion SA Vehicle Pricing Index (VPI) for Q4 2020 confirmed an increase in the prices of both new and pre-owned vehicles.
In 2020, the VPI for new vehicles rose to 9.6% in the last quarter (from 2.9% in the same period in 2019). Used vehicle prices rose from 1.2% in 2019 to 2.9% in 2020 (focusing on the same period).
This means that even though the interest rate has decreased substantially, consumers have still spent more on average on their vehicles in 2020, with this trend creeping into 2021.