This is according to the latest data from WesBank, which showed that the monthly mobility basket, which comprises instalments, fuel, insurance and maintenance fees, has increased 24.2 percent since July 2013.
Last week the SA Reserve Bank announced that interest rates would be cut by 25 basis points, a move that will have a positive effect on household budget, consumers with vehicle finance, home loans and credit cards will have more disposable income, as instalments become more affordable.
However, July’s lower fuel prices are forecast to be short-lived as despite this month’s fuel prices being lower than they were during July last year, stronger oil prices and a weaker rand mean an increase is on the cards for next month, said WesBank.
Rudolf Mahoney, the head of brand and communications at WesBank, said the bank’s mobility calculator gave consumers an idea of the total costs associated with vehicle ownership.
“Seeing how these costs increase over time really helps people identify how important it is to budget properly and plan for the future. For example, an entry-level car that cost R100 000 in 2007, today that same costs more than R183 000, and the associate costs have also increased.”
Mahoney said for this month, the WesBank Mobility Calculator reflected that the average cost of motoring rose to R7119.80, 6.1 percent higher than July last year, when the monthly mobility basket was R6709.53 and compared to five years ago, the total cost of motoring is now 24.2 percent higher. He said in July 2013, monthly costs amounted to just R5732.64.
“Vehicle instalments and fuel spend remain the biggest portions of the monthly mobility basket’ However, insurance premiums, vehicle instalments and maintenance costs account for the highest increases over the last five years, mainly as a result of vehicle price inflation. Between 2013 and 2017, rising interest rates and higher new vehicle prices saw instalments increase 43.8 percent. Rising vehicle prices also resulted in higher insurance premiums, which grew 38.6 percent over the same period.”
Mahoney said although the calculator was based on pricing for an entry-level vehicle, WesBank’s data also showed that consumers are spending far more on new and used vehicles, influenced by vehicle price inflation. And last month, the average new vehicle financed through WesBank cost R300 181, while the average used vehicle cost R202 796.
Data from TransUnion suggested that new vehicle price inflation was slowing down, yet the effects of this won’t be seen immediately in sales figures, while instalments, fuel and maintenance costs have increased consistently, average monthly fuel spend has declined over the past two years.
Mahoney said when viewed as a portion of the monthly motoring budget, fuel spend only accounted for 31 percent this month, which contrasted with 34 percent in July last year and 39.7 percent in July 2013.
“Fuel prices are influenced by the exchange rate and the international price of oil, with general inflation playing a far smaller role. In 2013 and 2014, fuel prices were on the rise and the monthly fuel spend was roughly equal to a small vehicle’s instalment. This is no longer the case, but it doesn’t mean the cost of motoring is lower.”
Fluctuating fuel prices were one of the reasons that consumers should not base their entire motoring budgets on fuel spend and instead, motorists should take a longer-term view when planning a car purchase, and ensure that their budgets are able to absorb higher maintenance costs and insurance premiums four to five years down the line.
“Interests rate cuts and lower fuel costs are always welcome, but this shouldn’t influence a vehicle purchase. If you’ve budgeted properly these windfalls should be welcome surprises, not financial lifesavers. The smartest move is to plan for rising costs over the duration of your finance contract, and take advantage of price cuts when they happen.”