The cost of cars
Judy Bryant
Posted Wed, 29 Jun 2005
Got your eye on a new set of wheels? With tyres, servicing, insurance and depreciation to take into account, not to mention the sky-rocketing fuel price, make sure you review all the running costs before revving your motor.
It pays to take a good, hard look at the total cost of vehicle ownership, before committing to a car that may prove too expensive down the line. René Roux, Old Mutual Bank marketing manager, says signing on the dotted line and handing over a deposit for a new car is only the start of your motoring costs.
"Over the coming years there will be mounting fuel bills, insurance premiums, as well as servicing and maintenance. And should you want to sell, you need to consider the effects of depreciation — a reduction in value due to wear and tear.”
“A vehicle is a major purchase that most people acquire on credit, and it should be considered as part of your overall financial planning, preferably with the help of your banker, broker or personal financial adviser,” advises Roux.
There are a number of costs that need to be included in your budgeting plan before you buy a car:
Insurance
When preparing a premium quote for you, insurance companies take into consideration criteria such as your address, choice of car, occupation, age, health, annual mileage, past accidents and driving convictions. Score badly in some of these areas and you could be in for a premium shock.
The majority of insurance companies now offer online quotes, but it’s still worth calling the company to see if additional discounts are possible.
Fuel
Rising oil prices have had a dramatic effect on fuel prices and a car’s average consumption is now a crucial factor when choosing your vehicle. The difference in fuel costs between a hefty 4x4 and an urban runabout, over 12 months and 18 000 kilometres, runs into thousands of rands.
The sales brochure will quote an official consumption figure and this can guide you when working out fuel costs, but it’s worth remembering that in real world driving conditions you’re unlikely to match the official average.
Tyres
Tyres are expensive. A high performance sports car could munch a set of specialist rear tyres every 15 000 – 25 000 km, and they’ll be costly to replace.
In contrast, a zippy little car might more than double that range on a single set of wheels. Find out the size and type of tyres fitted to the car you’re seriously considering and phone a couple of tyre specialists to find out what replacements cost.
Avoid the temptation to fit an inferior set of products – they don’t last as long and compromise the car’s performance and your safety.
Servicing
With the general adoption of three year warranties on new cars it’s become easier to predict the costs of servicing and routine maintenance. Find out how often the car will need to be serviced and what
the costs of each service should be. These can vary dramatically from model to model. Some manufacturers offer free or packaged service deals — clarify whether they cover both parts and servicing.
Depreciation
The price of depreciation is often more than all the other running costs put together. Some cars will lose 30 percent of their value the moment you drive out of the showroom. It’s a depressing thought, but with careful research, you can minimise the risks.
One way to protect your investment — if your budget allows — is to choose a premium brand with a high resale value. A prestigious model can sometimes work out cheaper per month than a mainstream alternative, even if it comes at a higher initial price. Again, much depends on your personal circumstances — speak to your banker or personal financial adviser.
Parking fees and toll roads
You may be lucky enough to enjoy free monthly parking at your workplace. If not, you
should factor in monthly parking garage costs. And depending on your route to work, you may have to include regular toll road payments.
Vehicle finance
Most people acquire their motor vehicles on credit, which commits them to regular monthly repayments. If you have a car allowance it makes sense to speak to your financial adviser about the tax implications of various options like an installment sale (where you must own the vehicle) and a lease or rental, where usage only is required.
When you are finally ready to make a purchase, keep in mind that selected banks will take care of everything from sourcing the vehicle to processing the final settlement.
