As a general guide costs of running a vehicle should not exceed 30 percent of gross monthly income
With vehicle owners already feeling the pinch of higher expenses due to the rising cost of fuel, coupled with interest rate hikes, the focus should now be on managing less obvious maintenance costs that slowly add up and eat away on monthly income.
Glenn Stead, Head of Products for Vehicle and Asset Finance at Standard Bank, says consumers should look at the overall maintenance costs when considering buying a new vehicle – not just the monthly instalment repayments. Consumers need to be realistic about what they can afford – and bear in mind that as vehicles depreciate in value – their running costs appreciate.
“As a guideline, costs of maintaining and running a vehicle should not exceed 30 percent of gross monthly income,” advises Mr Stead.
Fuel costs, which often vary depending on the length of the consumer’s daily commute, are one of the obvious costs. But there are the additional, less obvious costs that slowly add up, such as monthly insurance premiums, regular wear and tear on the vehicle, and e-toll fees etc.
“Added together, these running costs could end up being double the monthly instalment value, or even equal the value of monthly repayments for a new vehicle in a higher price range,” warns Mr Stead.
“Gone are the days when vehicle owners only had to worry about the petrol price, and increasing instalments due to interest rates going up. Escalating maintenance costs are also taking their toll on the costs associated with owning a vehicle,” says Mr Stead.
Mr Stead advises vehicle owners to consider these tips to better manage costs associated with maintaining and running their vehicles:
- Fixed rate vehicle financing option – although marginally higher than the variable rate, by utilising this option vehicle owners can be assured that they will not be affected by further interest rate hikes. It may be better for the first time buyer to use this option: it will be a bit more expensive, but at least it gives them peace of mind.
- Reward programmes – reward programmes offer an opportunity for vehicle owners to save on their monthly running costs. By filling up at select filling stations, account holders can get back as much as R1 for every litre. For example, Standard Bank’s UCount Rewards programme which started in 2012 has paid back R77 million in redemption point to customers through its UCount Rewards fuel reimbursement option.
- Reduce bills without compromising insurance – faced with the increased costs of maintaining their vehicles; owners should not be tempted to compromise on their insurance options – by either switching to an option with lower premiums, or cancelling their vehicle insurance completely.
Because many vehicle owners do not read the ‘fine print’ in their policies, which may contain exclusions such as high excess amounts, this can disadvantage them in the case of damage or loss of the vehicle.
Prospective vehicle owners should carefully examine the terms of their insurance contracts, to be clear on what is covered, and what isn’t – and whether they will need supplementary ‘top-up’ insurance.
- Understand the different types of vehicle financing products – it is important for vehicle buyers to understand the different types of vehicle financing options, and the financial implications of each: including the implications of residual payments at the end of the contract’s term. Banks offer a range of options and solutions to assist customers facing financial pressure. This includes structuring a grace period for repayments.
While the above list is by no means conclusive, these tips can go a long way to help vehicle owners to manage the escalating costs associated with running and maintaining their vehicles.
“Vehicle owners should not wait until things worsen, the minute they realise they are in dire straits they should talk to their financial advisor to identify a solution to help them through the difficulty,” says Mr Stead.