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Fuel costs now almost equal to vehicle instalments – WesBank

5th February 2014

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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As of midnight, when the fuel price increased to record highs, consumers will have to spend 36.5% of their monthly mobility budget on fuel, and 38.6% on vehicle instalments – this according to WesBank’s February Monthly Mobility Calculator.

The calculator takes into consideration the average cost of ownership to operate a vehicle on South African roads, including the monthly finance instalment, the cost of fuel to operate the vehicle, insurance, maintenance, and – for Gauteng motorists – the cost of e-tolls.

The calculator uses data dating back to 2007.

When looking to buy a vehicle, it is vital for consumers to also consider the costs of operating that vehicle, says WesBank CEO Chris de Kock.

“Affordability is not driven simply by the price of the car, but more by the total cost of ownership. The WesBank Monthly Mobility Calculator helps motorists understand the full picture.

“When considering a new vehicle purchase, also consider its fuel efficiency versus the average amount of monthly mileage you travel, as this will have a significant impact on your mobility budget,” advises De Kock.

“Consumers should consider all the factors impacting their ultimate mobility budget and take control where they can.”

Since 2007, the contribution of the finance instalment on the vehicle has trended downwards significantly, while the cost of fuel has taken an increasing share of the total basket.

In 2007, the instalment accounted for 53.3% of the mobility budget and fuel for 27.8%.

The insurance and maintenance portions of the budget have remained relatively stable over the past six years.

“Affordability remains the single biggest consideration affecting vehicle sales, whether new or pre-owned,” says De Kock.

“We can see from WesBank’s book how the flexibility of contract structures are being managed to address the affordability of the monthly instalment as extenuating costs impact outright affordability.

“In 2007, the average contract period over which finance transactions were concluded was 56 months. This has since increased to 68 months, indicating that customers are opting for longer contracts in order to manage the affordability of the monthly installments.”

The 0.5% interest rate hike last week will also impact consumer confidence.

“The cost of finance is the single element of your mobility budget that you have some control over when purchasing your vehicle of choice. While the interest rate increase has crept up slightly, rates remain at historical lows and new car buyers should consider capitalising by fixing rates,” notes De Kock.

* The WesBank Monthly Mobility Calculator uses a vehicle-base cash price of R100 000 in 2007, increased by prevailing new vehicle inflation, compounded annually.

The average contract period from WesBank’s Book for that specific month of each of the years is used in the calculation.

Finance calculations are based at prime +2%, with no balloon payment.

Fuel consumption is calculated at 7 l/100 km over an average of 2 500 km travelled a month.

Running cost and insurance are per Automobile Association tariffs.

The price of fuel is calculated at the prevailing fuel price for 93 unleaded inland for that month of each year.

E-tolls are calculated at the maximum capped amount with an e-tag of R450 a month.

 

 

Edited by Creamer Media Reporter

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