Get head into gear before buying a sweet new ride
Buying a car is an emotional and financial commitment that requires you to find the balance between choosing the ideal car while also maintaining a healthy bank balance.
The latest petrol price increases, on top of other pressures on your budget such as lower salary increases and rising costs, may have you wondering about the decisions you have made and whether you should review them.
"It's part of our culture to assess someone's wealth by the car they drive, so we're all part of this rat race to buy the most expensive car," says Thiart van de Merwe, wealth manager at Foundation Family Wealth.
Though consumers still have a healthy appetite for purchasing cars according to the latest new vehicle sales figures, they are more cognisant of current economic conditions and the strain it places on their finances, opting rather to go for smaller cost-effective and fuel-efficient classes.
"Consumers are feeling the pinch due to a combination of factors, including price increases from manufacturers due to a weakening rand, the VAT hike in April and ongoing fuel price increases," Ghana Msibi, Wesbank's executive head of sales and marketing, says.
However, fuel is not the only thing that keeps your car going. Aside from the vehicle repayments, you also have to consider the cost of insurance and maintenance, making it wise to not only build some cushion for additional expenses in your budget but also giving more thought to how you can adapt your driving habits to save even more.
"I always tell people to assess their affordability levels before making any long-term financial commitments like buying a car. It does not matter whether you're a first-time buyer, looking for a trade-in or an additional car for your family," Conrad Schwartz, a financial adviser at Atooh, says.
If you want to know what you should spend on a car, use the vehicle loan calculators offered on the websites of most major banks in the country.
These calculators allow you take into account a wide range of living expenses you may have to determine what you can afford as a loan repayment. Remember, however, to take into account all the costs related to owning the vehicle - parking, maintenance, security, insurance and petrol - to get a clear picture of what you can afford.
Van der Merwe says you can enrich your saving process and build up towards financial freedom by making the smart choice to start small and delay the purchase of your ideal car by five years.
If you can't do without a car, you could choose a smaller car and save the difference between the car you get versus your ideal.
You will save not only on repayments but also on maintenance and fuel.
Saving just R1000 a month and investing it to earn 9% a year could give you an additional R1m for your retirement if it is still 20 years away and more if you still have more than 20 years of working life ahead of you.
Maintenance: a cost or saving?
When it comes to maintenance, the cost of keeping your car properly serviced is actually an investment in the long run. The AA suggests the following to save on maintenance:
• Change your oil and oil filter frequently;
• Check tyre pressure often and get the wheels balanced once a year; and
• Assess your fluid levels including coolant and transmission often.
• Expensive go-juice
Unfortunately, you cannot negotiate better prices for the go-juice, but you can make small changes in your driving habits that will allow your fuel to take you further, including:
• Avoid using the air conditioner unnecessarily;
• Keep a light foot on the accelerator and brake; and
• Consider car-pooling.
• Trimming down the hefty insurance
Car insurance is a major expense for most people, especially if you do not have a perfect driving history or live in certain high-risk areas, Schwartz says. There are, however, ways to save on car insurance, including:
Shop around for insurance and compare costs but be sure you are comparing like for like cover especially when it comes to what is insured, who is insured to drive the vehicle and the excess;
Taking out car and home insurance with the same insurer will usually give you a lower premium;
Cut back on cover for addition benefits such as roadside assistance; and
Keep a healthy credit score.