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These are the hidden costs of owning a car

28 April 2020
5 minute read

Young woman sitting in car

Buying a car is a big life step and a dream for many South Africans. But if you’re in the market for a car, don't just look at the purchase price! Even the best budgeters can find themselves financially stretched by unexpected costs, like a major repair or insurance excess. We’ve identified the costs of owning a car and how you can budget for them, so your finances stay in good shape while you stay on the road.

The costs of owning a car

CostHow muchPaid whenImportant information
Finance agreement instalment Depends on type of vehicle and terms of financing Monthly Changes in interest rates can change your instalment amount
Petrol and oil Depends on petrol price, how often and how far you drive Each time you fill up Petrol price changes each month
Toll fees Depends on which roads you take and how often When you pass through a toll-plaza If you use an e-tag check your statements for accuracy
Parking Depends on where you park and any parking subsidies you receive Monthly, or when you visit a paid for parking area Find out if this increases annually
Annual service and maintenance Varies from R0 upwards, depending on any service and maintenance plans Annually, or when you need repairs, servicing and maintenance Check the details of service and maintenance agreements
Annual licence fees R400+ Once a year Budget for rate increases above inflation
Insurance R350+, depending on type of cover and car Each month Find out about excess payments and what is and isn’t covered
Security/tracker R0+. Your car will have some security, but you might want to install extra Once off installation Your insurer may install a tracking device for free
Safety (dash cams, sunshields, shatterproof glass, child car seats) R0+, depending on what you want Once off Buy reputable models that meet industry standards such as SABS
Roadside assistance AA standard membership is R128 a month Monthly or annually Check to see if it’s included in insurance
Fines, penalties R0+ Shortly after they are incurred Try and keep these to R0
Residual  or balloon payment Depends on your finance agreement At the end of the car finance agreement Optional, but if you have it you need to budget for it

Budget for these costsWhen you know what costs you may incur and when you need to pay them, build them into your annual and monthly budget. Split the items into monthly, incidental, annual and once off costs.

Monthly costs
These are essential and include the finance instalment, petrol, parking and insurance. Set an amount aside each month in your budget for these and have some funds spare in case the interest rate or petrol price goes up.

Incidental costs
These are things such as an excess on a claim, fines and toll fees. Good driving habits mean you won’t have to pay for fines, but if you travel across the country you will incur toll fees. Estimate if and when you will incur toll fees and build them into that month’s budget. It’s a good idea to have a few thousand rand saved in a car emergency fund for expenses such as an insurance excess.

Annual costs
These include your annual service, general maintenance and licence fees.

You can choose to take a service and maintenance plan, which can be very reasonable, and will give you the security of knowing that most costs relating to general upkeep will be covered. The plan will only be for a certain time period or number of kilometres, so check when this is and if you can extend it.  If you don’t have a service or maintenance plan, find out from your dealer or service agent how much a service costs and the cost of essential parts. Then work out what you need to save every month so that you can afford the service when it’s due.

If your service and maintenance plan doesn’t cover everything, for example a new car battery, add a few thousand rand to your car emergency fund.

Once-off costs
When you buy a car, you might be offered a “balloon payment”, which means you pay less monthly but you will have to pay a lump sum, or residual at the end of your finance agreement, usually six years.

After the six years, you can choose to keep your car or trade it in. If your finance agreement has a residual amount and you choose to keep your car, you will have to pay the residual. So, think about adding an additional amount to your budget for this.

You may choose to save, say, R200 a month for 72 months - which would give you around R18 000. You could put this towards the balloon payment.

If you are likely to trade in your car after six years, be sure to check annual values once a year. This way you know if the trade in value is close to the residual value. If the trade-in value of your car is less than the residual you will need to save an extra amount or refinance your vehicle. If you keep track of this each year, you won’t be caught off guard by a difference between the trade in value and the residual amount.

Additional security is another once-off cost. You may choose to upgrade your security, for instance by installing a tracking device, either when you buy the car or at some later date.

Calculate the costs before you buyIt’s one thing to know the purchase price of your dream car and being able to afford it, it’s another to keep it on the road and in good condition. So, before you buy, work out what the costs could be and make sure you can afford them. If you feel the costs are too high or could stretch your budget too much, opt for a cheaper model car or look around for a good used car.

Bonus informationUseful resources to help you plan and save money on the road:

Shell South Africa has advice on how to save money when you drive.

Automobile Association of South Africa (AASA) updates fuel and diesel prices monthly.

AASA also has updates on road conditions and you can work out trip distances across SA.

Wesbank’s calculators can help you work out instalment amounts and residual values.

Arrive Alive offers road safety tips and other motoring news.

Kinsey Report has details of vehicle running costs.

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