How much you’re saving on your car loan in South Africa following the latest interest rate cut
The South African Reserve Bank (SARB) has reduced interest rates, bringing some savings to car owners in South Africa—and more are likely to follow.
Yesterday, September 19, the SARB’s Monetary Policy Committee (MPC) unanimously decided to drop the repo rate by 25 basis points from its 15-year high of 8.25% to 8.0% – in line with expectations.
The prime interest rate thus also dropped from 11.75% to 11.50%.
Reserve Bank governor Lesetja Kganyago said that the MPC reached a consensus of a 25 basis point cut, stating that a less restrictive stance was consistent with sustainably lower inflation over the medium term.
The latest inflation print for South Africa in August was 4.4%, a three-year low, and below the SARB’s target midpoint of 4.5%.
The rate cut follows similar moves from other international central banks. The US FED cut interest rates by 50 basis points a day before the MPC’s decision.
South African assets have performed relatively well in recent months. The rand has strengthened more than many of its emerging market peers, while long-term yields have moderated and spreads over US rates have narrowed.
The terms of a car loan depend on several factors, so we have decided to look at the value of a car with no deposit or trade-in and a prime-linked interest rate.
According to WesBank, the average amount for a new vehicle financed through their institution was approximately R410,000.
Using Wesbank’s fiance calculator, the average South African car purchaser would save R51 monthly on car repayments with the 25 basis point cut in interest rates.
The savings increase as the car’s value rises, with a R500,000 car saving R63 per month, while a R1 million car would save R126.
Further savings can be expected following the SARB’s latest decision.
Kganyago noted that the SARB’s forecast sees rates moving towards neutral next year, stabilising slightly above 7%. This means that another 75-100 basis points worth of cuts are on the cards for South Africa.
The savings on vehicles following the latest interest rate decrease can be seen below:
Value of the car | July Rate (11.75%) | Sep Rate (11.50%) | Change |
---|---|---|---|
R175 000 | R3 966 | R3 944 | -R22 |
R200 000 | R4 519 | R4 494 | -R25 |
R225 000 | R5 072 | R5 043 | -R29 |
R250 000 | R5 625 | R5 593 | -R32 |
R275 000 | R6 178 | R6 143 | -R35 |
R300 000 | R6 731 | R6 693 | -R38 |
R350 000 | R7 837 | R7 793 | -R44 |
R400 000 | R8 943 | R8 893 | -R50 |
R410 000 | R9 164 | R9 113 | -R51 |
R450 000 | R10 049 | R9 992 | -R57 |
R500 000 | R11 155 | R11 092 | -R63 |
R550 000 | R12 261 | R12 191 | -R70 |
R600 000 | R13 367 | R13 291 | -R76 |
R650 000 | R14 473 | R14 391 | -R82 |
R700 000 | R15 579 | R15 490 | -R89 |
R750 000 | R16 684 | R16 590 | -R94 |
R800 000 | R17 790 | R17 689 | -R101 |
R850 000 | R18 896 | R18 789 | -R107 |
R900 000 | R20 002 | R19 888 | -R114 |
R950 000 | R21 108 | R20 988 | -R120 |
R1 000 000 | R22 214 | R22 088 | -R126 |
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