What in the car instalment?

A woman and her child browsing through a car dealership.
A woman and her child browsing through a car dealership.
Getty Images/Gallo Images

About 12 years ago, buying a car in Mzansi didn’t cost an arm and a leg — as is the case today. For a starter pack like a Kia Picanto, a first-time car buyer could get away with an instalment of about R2 500, provided they had put down a deposit.

Today, you’re probably looking at a monthly instalment of over R3 500. Some might argue that the prices are justifiable due to inflation, and given that most cars are decked out in modern technology. However, these inflated prices still beg the question: Why are cars in Mzansi overpriced when compared with other regions?

READ MORE | 9 things you need to remember after a car accident 

In early 2018, cars were cheaper than they had been in over a year, yet the sales dial still didn’t budge as much as had been expected, says Kriben Reddy, head of TransUnion Auto in South Africa, in a Wheels24 interview.

Buying a car does not end with the instalment, either. You also have to factor in interest rate hikes, the ever-increasing petrol price and maintenance costs. All of these play a huge role in affordability.

Taxes

According to entrepreneur and motoring blogger George Matsheke, the taxes levied on imported vehicles are to blame for high new-vehicle prices in South Africa. “Shockingly, the final tax that’s payable can be as high as 45% of a car’s total price. Cars assembled in South Africa don’t necessarily escape these taxes either, because they’re also levied on imported parts and components,” states an article on pawnmycar. co.za.

The rand’s dwindling value when compared with major currencies like the dollar and euro means that new car prices are above the general inflation rate

The National Association of Automobile Manufacturers of South Africa is advocating for a shift to take place where these importing taxes are concerned, warning that it will ultimately hurt local car sales, says Matsheke.

The extras 

You may want a set of wheels with Bluetooth connectivity, voice recognition, ABS brakes, rear- park distance control and all other features that make cars “cool” these days. However, most features come as extras and not standard with the vehicle. This is something that some car buyers are not aware of, says motoring journo Njabulo Ngcobo.

READ MORE | 6 car crisis you can solve 

In Europe, for instance, you have the option of buying a vehicle in its most basic form – sans the frills. This helps to push the price down by a huge margin. A maintenance plan, usually included in the purchase figure, also adds to the high cost. And, you thought that this was just a benefit that didn’t cost a cent!

Currency matters 

There is nothing as disloyal and fragile as a currency. In the past, we have seen the rand react to a president’s cough, junk status ratings, election results or even protest actions. You may plead ignorance if you don’t travel much and think the fluctuating rand won’t hit your pocket badly. Sadly, that is not the case, says Ngcobo.

The rand’s dwindling value when compared with major currencies like the dollar and euro means that new car prices are above the general inflation rate. Any movement in the currency impacts car prices directly. A car that was R500 000 in the morning, could easily cost R50 000 more when an event like the current COVID-19 pandemic strikes unexpectedly.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24