South Africa is shifting gears on new and used cars. Here’s what you need to know

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(Image: Getty Images)
(Image: Getty Images)

Buying a new or pre-owned car is no small feat; between the car jargon and fluctuating market prices, you need to be in tune with the latest trends to ensure you drive off in a car that is good for you and your pocket.

In Deloitte’s 2022 Global Automotive Consumer Study, it was revealed that 55% of South African consumers said they would purchase their next vehicle as planned despite the pandemic. Similarly, in McKinsey’s 2021 Global Covid-19 Auto and Mobility Consumer Survey, it was found that consumer’s intent to purchase new and used cars over the next 12 months is almost back to pre-Covid-19 levels.

With the market for new and used cars primed to return to the road, we look at some of the things you need to know when making your next purchase.

Finding the right carIf you’re looking for a new car, ensure your new vehicle is right for you and your budget before you drive it out the lot.

According to South Africa’s largest short-term insurer, Santam, you need to be strict with your budget and remember to think beyond your monthly repayment amount, especially additional expenses.

 "A well-known tip to calculate extra costs: if your car payment is R6 000/m, budget for another R6 000/m for fuel, maintenance, and car insurance. Always aim for the newest car with the lowest mileage possible for your budget,” the insurer advises in this blog post.

If you have an existing car you want to sell to help with the deposit for your new car, make sure you know how much it’s worth by doing your research online, or discussing a trade-in with a reputable dealer. It is also important to keep the car in good condition and keep its maintenance and service records up to date.

Financing your carIn Deloitte’s study, it was also found that over one-third of consumers plan to take out a loan when acquiring their next vehicle, with term durations ranging from 2–5 years.

If you can’t afford to pay cash for your car, financing it through a bank is the next best thing. Although all the terms and conditions might seem daunting, it is important to know the exact terms and conditions of your finance package, as well as the interest rate you’ll be paying.

Types of interest rates

  • Fixed rate: You will continue to pay the same monthly instalment and be subject to the same interest rate for the entire term of your agreement. In other words, you are well aware of what to expect.

  • Linked rate: This rate is linked to South Africa's prime lending rate, which according to the Reserve Bank currently sits at 10.50%*. If it goes up, so will your instalment; if it goes down, you'll pay less. This choice carries a little bit more risk, so be sure you have some extra money on hand in case the interest rate increases.

There are other important concepts you need to understand before settling on a finance plan, such as residuals or balloon payments. This is when a percentage of the vehicle's value is deducted from the finance amount and is paid in one lump sum at the end of the finance period.

Insuring your carBefore finding the right insurer, it is important to first understand the different types of coverage you can get:

Types of cover

  • Comprehensive cover: This covers the accidental loss or damage to your vehicle through accidents, theft, or a natural disaster. If, for example, you cause an accident, it also covers both your car and a third party's car.

  • Third-party cover: The damage to the other driver's car will be paid for if you cause an accident. It includes the amount for which you are legally obligated to a third party. You may want to think about this insurance if your automobile is fairly old and paid off.

  • Limited cover: This allows you to claim for loss or damage to your vehicle, including third-party liability, in the event of a fire, lightning, explosion, theft or hijacking, or attempted theft or hijacking.

There is no one-size-fits-all approach to car insurance; therefore, it is important to find an insurer that can tailor your package to your driving needs. 

Santam’s 2020/2021 Insurance Barometer report found that 82% of personal lines intermediaries and 46% of consumers surveyed are interested in discounted motor vehicle premiums based on less frequent driving.

Santam offers a Smart Pack product that gives you a discount on your premium depending on your annual mileage and vehicle type.

If you're looking for affordable car insurance or more information on how to pick the right insurer for you, visit Santam HERE or call 0860 444 444 or your intermediary to request a quote. 

This post was sponsored by Santam and produced by the Adspace Studio.


Santam is an authorised financial services provider (FSP 3416), a licensed non-life insurer and controlling company for its group companies.

*As at November 25, 2022.

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