Considering replacing your car?

Mar 25, 2021 | General Financial Planning News

Rene Pienaar, Trust Officer, provides tips on what to consider when buying a car and also on changes to the agent-only servicing and repairs.

We love our chariots, our automobiles, our cars! The freedom of travel and the privilege to own and drive a car is deeply rooted in all of our cultures. The cost of motoring, however, has become or is becoming almost prohibitively expensive, with few safe, efficient and cost-effective alternatives.

I am sure we do not need to revisit the depreciating purchasing power of most currencies or how many McDonalds burgers you can buy for a dollar (½ a small one). The cheapest new car today in South Africa (Car Magazine 2021) is a Suzuki Celerio (no, it is not a salad) for R149,000. The cost of Car Magazine this month is R49.90 Vat inclusive; in January 1981 it was 77 cents + 3 cents GST! This is a good example of inflation!

The total cost of motoring includes:

  • Cost of buying your preferred chariot
  • Financing the purchase
  • Depreciation (how much you get back when you sell / trade in the car)
  • Fuel, servicing, maintenance, licencing, insurance, and time.

Time is one of the factors we usually do not consider until we spend it on the side of the road due to a break-down, or the alternative arrangements we need to make for a service or repair. Excluding cost analysis or special statistics, I am sure we would agree that hassle-free motoring at a low cost and a reasonable trade in value is what we all strive for?

How do we achieve our “sweet spot”?


  • There is always a cost to buying a vehicle  ̶  financing (interest charged) or paying cash (loss of capital growth or interest earned) .
  • Do not get caught with the idea of leasing a vehicle; this is what I refer to as “voodoo financing”! To illustrate I would like to use a recent advert for a premium vehicle:
    • The Offer is for a car with a list price of R634,488: a deposit of 10%, an interest rate of 9.75% and a residual / balloon payment (final value if you want to keep the car) of R 398,451  ̶  at an “affordable” R9,000pm for 36 months – with some terms and conditions. Ultimately, since you pay a deposit of R64,000 and never pay the car off or own it at the end of the period, you are hiring this car for R390,000 for three years.
    • Alternatively, for the same deposit, payment period and interest rate, you should be shopping for a car for R340,000. After 36 months, even at 20% depreciation, you should get back R150,000 when you sell – this makes your next vehicle far more cost effective.

Some of my (very subjective) tips:

  • Start with your budget, either your monthly or capital outlay of a cash purchase budget (do not forget insurance, fuel and servicing) or
  • Always budget for your transportation costs: whether owning a car outright or paying one off. You will have to pay some maintenance and save for replacement.
  • Try to finance over the shortest period possible for your budget – three to four years maximum.
  • Buy used: new car depreciation is unbelievably high.
  • Buy just before a “facelift” or shape change in model – depreciation is then at its highest point.
  • When you have decided on a make and model, see how many are on the road and what the older models are selling for (you need to sell it later). Will it depreciate more than other cars?
  • Check on servicing and maintenance and support of the dealership – do they have a good record?
  • Drive it for as long as possible to get maximum value.
  • Do a proper test drive. Will you be happy with the car for a long period? (nothing worse than having to drive something you hate).

Agent-only servicing / repairs to maintain manufacturer warranty:

On 10 December 2020, the competition commission released their final document for repair, servicing and maintenance of motor vehicles, a “guideline for the competition in SA automotive aftermarket”, to be implemented from 01 July 2021.

Quite a bit has been published since the release of this document. Some of the highlights for the consumer are:

  • To maintain your warranty, you will not be forced to use the agents* to service your vehicle (which is great if you do not have a service plan included).
  • Maintenance and service plans will have to be sold separately with transparency on what maintenance or service will include or exclude (R1,000 per wiper blade?) .
  • “Original” vs “non-original” parts: agents will have to permit the use of non-branded lower cost parts if inherently the same. The only restriction permitted will be related to security systems of the vehicle.

This is a big win for the SA consumer and small business, but I thought that the old saying of “buyer beware” is appropriate. Taking the last point from the guideline – Monitoring and Adherence stipulates that affected parties to this guideline shall be responsible to give effect to the provisions.

Buying a vehicle from any agent / supplier is like any other transaction (though the value is usually significantly higher) but remains on a good faith basis. Fighting a bigger institution for your consumer rights when you have a grievance can still be stressful, so make sure you deal with a reputable dealer.

In conclusion: test drive, do some research and buy a reputable brand from a trustworthy dealership.

*An agent is the company that sells a particular brand of car (e.g. Barons who sell Volkswagen).