It\u2019s been a whole year since the South African Reserve Bank (SARB) hiked interest rates to 15-year highs, and this has cost the average car owner an estimated R832 per month or R10,008 over the past year in interest on their car repayments.<\/p>\n\n\n\n
The South African Reserve Bank’s (SARB’s) Monetary Policy Committee voted in May 2024 to hold rates. This means that the repo rate remains at 8.25% and the prime lending rate at 11.75%. <\/p>\n\n\n\n
The decision was unanimous, and since the beginning of the rate hike cycle in November 2021, rates have been raised by 475 basis points to their highest levels in 15 years. <\/p>\n\n\n\n
Interest rates have been kept at this level following the last policy rate decision a year ago, which is putting financial pressure on households that are also dealing with other increased expenses such as electricity, fuel, and bond repayments.<\/p>\n\n\n\n
According to TransUnion’s Vehicle Price Index for Q4 2021, the average value of a financed vehicle is around R360,000, which is around the same time as the start of the interest rate hike cycle.<\/p>\n\n\n\n
WesBank also noted that the average new vehicle financed through WesBank was roughly R358,390 at the time. <\/p>\n\n\n\n
This means those who bought a car at this value at the start of the hike cycle at 7% (prime September 2021) have been paying an extra R834 per month on their car loan at 11.75% (prime since May 2023).<\/p>\n\n\n\n
Assuming a payment term of 60 months (five years) and a 0% deposit, this works out to an extra R10,008 over the past year (May 2023 to May 2024).<\/strong><\/p>\n\n\n\n However, this increases with the price of the vehicle, as those who bought an R500,000 car pay R1,161 extra per month, while the few who purchased a R1 million car pay a notable R2,320 extra per month.<\/p>\n\n\n\n These work out to an extra R13,932 and R27,840, respectively, since May 2023.<\/p>\n\n\n\n The table below highlights the extra cost of financing a car at the current interest rate compared to September <\/strong>2021, before the rate hike cycle started, and its accumulation over the past year.<\/p>\n\n\n\n WesBank noted that household budgets remain under tremendous pressure, and those who have had car and home loans since the start of the rate hiking cycle, post-Covid-19, are really feeling the effects.<\/p>\n\n\n\n What’s worse, the costs over the period are compounded when you consider that the total cost of vehicle ownership is more than the initial price tag of the vehicle.<\/p>\n\n\n\n These additional expenses include the added costs of fuel, comprehensive insurance coverage, and general maintenance and service expenses, all of which have increased over the past year. <\/p>\n\n\n\n For example, the cost of unleaded petrol 95 in May 2024 was R25.49 per litre, a difference of R2.64 from the R22.95 in May 2023. <\/p>\n\n\n\n This likely added thousands more to the car’s cost. Despite this, petrol recently came down by R1.24 in June 2024, and there is likely more joy to come in July.<\/p>\n\n\n\nValue of the car<\/th> Sept 2021 (7%)<\/th> May 2024 (11.75%)<\/th> Change<\/th> Since May 2023<\/th><\/tr><\/thead> R175 000<\/td> R3 558<\/td> R3 966<\/td> +R408<\/td> +R4 896<\/mark><\/td><\/tr> R200 000<\/td> R4 053<\/td> R4 519<\/td> +R466<\/td> +R5 592<\/mark><\/td><\/tr> R225 000<\/td> R4 548<\/td> R5 072<\/td> +R524<\/td> +R6 288<\/mark><\/td><\/tr> R250 000<\/td> R5 043<\/td> R5 625<\/td> +R582<\/td> +R6 984<\/mark><\/td><\/tr> R275 000<\/td> R5 538<\/td> R6 178<\/td> +R640<\/td> +R7 680<\/mark><\/td><\/tr> R300 000<\/td> R6 033<\/td> R6 731<\/td> +R698<\/td> +R8 376<\/mark><\/td><\/tr> R325 000<\/td> R6 528<\/td> R7 284<\/td> +R756<\/td> +R9 072<\/mark><\/td><\/tr> R350 000<\/td> R7 023<\/td> R7 837<\/td> +R814<\/td> +R9 768<\/mark><\/td><\/tr> R359 000<\/strong><\/td> R7 202<\/strong><\/td> R8 036<\/strong><\/td> +R834<\/strong><\/td> +R10 008<\/mark><\/strong><\/td><\/tr> R375 000<\/td> R7 518<\/td> R8 390<\/td> +R872<\/td> +R10 464<\/mark><\/td><\/tr> R400 000<\/td> R8 013<\/td> R8 943<\/td> +R930<\/td> +R11 160<\/mark><\/td><\/tr> R450 000<\/td> R9 003<\/td> R10 049<\/td> +R1 046<\/td> +R12 552<\/mark><\/td><\/tr> R500 000<\/td> R9 994<\/td> R11 155<\/td> +R1 161<\/td> +R13 932<\/mark><\/td><\/tr> R550 000<\/td> R10 984<\/td> R12 261<\/td> +R1 277<\/td> +R15 324<\/mark><\/td><\/tr> R600 000<\/td> R11 974<\/td> R13 367<\/td> +R1 393<\/td> +R16 716<\/mark><\/td><\/tr> R650 000<\/td> R12 964<\/td> R14 473<\/td> +R1 509<\/td> +R18 108<\/mark><\/td><\/tr> R700 000<\/td> R13 954<\/td> R15 579<\/td> +R1 625<\/td> +R19 500<\/mark><\/td><\/tr> R750 000<\/td> R14 944<\/td> R16 684<\/td> +R1 740<\/td> +R20 880<\/mark><\/td><\/tr> R800 000<\/td> R15 934<\/td> R17 790<\/td> +R1 856<\/td> +R22 272<\/mark><\/td><\/tr> R850 000<\/td> R16 924<\/td> R18 896<\/td> +R1 972<\/td> +R23 664<\/mark><\/td><\/tr> R900 000<\/td> R17 914<\/td> R20 002<\/td> +R2 088<\/td> +R25 056<\/mark><\/td><\/tr> R950 000<\/td> R18 904<\/td> R21 108<\/td> +R2 204<\/td> +R26 448<\/mark><\/td><\/tr> R1 000 000<\/td> R19 894<\/td> R22 214<\/td> +R2 320<\/td> +R27 840<\/mark><\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n