The Real Cost of Keeping Your Car on the Road

The cost of owning, maintaining, and keeping a vehicle on the road is an issue consumers must contend with daily.

The lasting effects of the COVID-19 pandemic on the automotive industry are still prevalent. The COVID impact, coupled with the economic downturn, escalating interest rates and increases in the fuel price and spare parts, have all impacted the production costs and sales of both new and used cars.

While 2022 has seen the country slowly return to normalcy, people are holding onto their current cars for longer. While this might be a saving in one area, the costs to maintain the vehicle and keep it in a running condition could add up.

With many more businesses and organisations reopening and expecting their employees to return to the workplace, more people must use their vehicles more often than in the past two years, increasing the wear and tear costs.

While fuel prices continue to hit record levels due to, among other things, the ongoing unrest between Russia and Ukraine, fluctuations in the currency and a series of interest rate hikes, the consumer must bear the brunt of rising prices.

Being back on the road means we now must manage the actual costs of total vehicle ownership. These need consideration into what is, for many, an already constrained budget.

It is central to understand what makes up the total monthly cost of vehicle ownership, whether the car is being driven more frequently or not. While fuel consumption might vary accordingly, fixed monthly payments, such as vehicle finance and insurance costs, are part of fixed expenses in the monthly household budget.

And, if you have selected a linked-interest rate in your repayment plan, interest rate fluctuations will also impact the total amount. 

All these costs have resulted in vehicle owners considering affordability in their purchasing decision. Subsequently, this has resulted in new affordability-focused brands and entry-level options entering the market. These options enable customers to tackle affordability at a lower price to lower their monthly expenses without sacrificing the benefits of owning a new vehicle.

The phenomenon can be illustrated by analysing the total cost of ownership figures for the past five years, from 2018 – November 2022. The figures indicate a vehicle owner in November 2022 is now paying, on average, R2 515 more per month than in 2018 for the total mobility costs.

* It is important to note this monthly total cost of vehicle ownership table is based on data that constantly shifts concerning market activity and is thus intended as a guideline only.

For this exercise, we have taken an average entry-level vehicle (approx. R250000) that travels approximately 2 500 kilometres a month.

The monthly cost of the vehicle ownership basket, comprising instalments, fuel, insurance, and maintenance costs, has increased to R10 165 in November 2022 from R7 716 in 2021 due to the increase in fuel costs and ongoing interest rate hikes. While this reflects a percentage increase of 32% year on year (November 2022 over 2021), the November 2022 average figure is also 33% higher than five years ago, when the monthly cost averaged R7 650 in 2018.

In 2022, vehicle instalments and fuel spending remain the substantial portions of the basket, accounting for 81% of the monthly expense. Fuel spending accounts for 39% of the total, with the vehicle instalment cost at 42%.

The figure for November 2022 indicates the average monthly fuel spend, at R3,950, is almost on par with the vehicle instalment rate at R4 313. The monthly insurance cost of R1 409 makes up 14% of the expenditure, with running costs per month accounting for the final 5% at R493.

This varies substantially to the mobility basket in 2018, where fuel spending accounted for only 36% of the total at R2 765 while the average vehicle instalment was 44% at R3 383. A similar pattern has emerged over the past four years.

However, this year indicates fuel spending and vehicle instalment costs have a similar weighting, with each accounting for approximately 40% of the total – an indication of the massive fuel price and interest rate increases motorists must contend with currently.

The figures up to November 2022 are also further evidence of the wide-reaching impact of global and local influences on the total cost of vehicle ownership.

These costs are reflected in the WesBank Mobility Calculator, a tool that tracks and calculates motoring expenses. The total cost basket comprises all the fees associated with vehicle ownership: the monthly instalment, comprehensive insurance premium, fuel and maintenance costs. These expenses are updated regularly to reflect current inflation and interest rates, the rising petrol price and other fluctuating costs.

It is important to remember the monthly vehicle ownership basket figure is based on data that constantly shifts about market activity and is thus intended as a guideline only. The economic impact of COVID-19 created an anomaly in the 2019 data and should also be taken into consideration when comparing the 2022 figures with 2020 and 2021.

As a result of vehicle price inflation over the past year and other industry constraints, consumers have spent more on average for new and used vehicles in 2022, and this trend is likely to continue into 2023. In October this year, the average value of a new vehicle financed through WesBank was R388 338 compared to R368 696 in October 2021. This reflects a 5% year-on-year average price increase for new vehicles

Prospective vehicle owners should take a holistic view when planning a car purchase to ensure they do not overextend themselves by right-sizing the spending to fit their budget. This includes making allowances for increases in costs down the line, such as a higher interest rate or a further increase in the fuel price, as we are currently experiencing in 2022.

A clever move is to make provision for these rising costs throughout the finance contract.