So, you have found a car that you think is affordable. But, owning a car comes with far more costs then simply the deposit. Take a look.
You are always trawling the web, looking at all the latest models of cars as if they were (human) models. But, do you know the true costs of owning a car?Buying your first car is a big step and is, likely, to be your first large purchase you. Because a car is a significant investment, with considerable cost implications, saving for an extended period of time is likely to be a part of the process. But, what about the costs after buying your car?Whilst you may have taken into account the deposit, and the monthly installments thereafter, you may have forgotten the two sets of costs that come with owning a car. These include fixed and running costs.
What Are My Fixed Costs?
Fixed costs, when owning a car, include monthly installments, insurance premiums, interest charges, depreciation, VAT, and the administration fees associated with a vehicle purchase.As is widely known, owning a car is one of the most frustrating assets because as soon as you drive your car off the showroom floor, 40% of its value drops off and 10 to 20%, each year, thereafter.So, why say all this? If you are looking to trade in your car every two to three years (a motoring industry myth), you may be surprised just how much your car has lost in resale value.Something to consider, however, is the car's utility value. This pertains to the actual use you get out of the car which, quite often, outweighs the retail value as a result of depreciation.The longer you keep your car, the less you pay in fixed costs. This is due to the fact that registration and administration are once-off costs and depreciation slows down each year. Therefore, insurance becomes cheaper and, once your car payments are paid off, you only have to worry about the running of the vehicle.
What Are My Running Costs?
Running costs vary between cars and are costs that will never fall away. Running costs include fuel, maintenance, repairs, parking fees, licensing, and traffic fines.While getting to the point, in owning a car, where you only pay running costs is ideal, they tend to increase the older the car gets. This may be due to the increased cost to maintain as the engine ages, which affects fuel consumption, etc.Do your research before owning a car as some brands certainly age better than others. Cars like the Toyota Corolla have certainly stood the test of time, with some staying with their owners for as long as thirty years.
Cost Of Ownership
Depending on the term and interest rate you have negotiated, for every R100 000 financed on a new vehicle, monthly car repayments should average around R2500 a month.This is not even including your monthly car insurance premiums. Premiums are dependent on a range of factors including your age, the area you live, your driving history and the make and model of your car.
So, by factoring in all your fixed and running costs, combined with your car insurance, the price you initially thought may have doubled or tripled!This, hopefully, makes you think twice about a flashy, expensive car that may eat away your budget quicker than a hungry teenager at the dinner table.We know, we know - you want all the fancy gadgets that come with the new flashy car. But, when considering your finances, it is important to have a car that fulfills your motoring needs and does not overextend your finances.This doesn’t mean safety and comfort features, it just means differentiating between your needs and your wants.
Don't Skip Your Research, You'll Pay For It Later
You may think the price of a car is affordable until, through research, you find out it is far from it. The most important research would be regarding the fuel consumption, price of parts, and the annual service. This may open your eyes to the true cost of owning that car you so desperately want.The annual Kinsey Report is a great indicator of running costs and provides a detailed list of car parts.