If you are in the market for a used car and wondering whether your salary can comfortably cover the costs of financing, you are not alone. Many South Africans are asking the same question: "Can I afford a car on finance, and what salary do I need to earn to make it work?"
Let’s break it down using a realistic example: financing a car priced at R150,000. This is a common price point for reliable used vehicles, and understanding the numbers can help you make an informed decision.
The Basics: What Does a R150,000 Car Cost Per Month?
To finance a car, you will typically take out a loan with a fixed interest rate and repayment period. Using the following assumptions:
Car price: R150,000
Loan term: 5 years (60 months)
Interest rate: 11% per annum (a common rate for vehicle finance in South Africa)
Deposit: 0% (no deposit)
Balloon payment: None
Using these figures, the monthly repayment works out to approximately R3,287.
What Salary Do You Need to Afford This?
We recommend that you spend no more than 20% of your gross monthly salary on vehicle repayments. This ensures you have enough left over for other living expenses, savings, and emergencies.
So, to afford a monthly payment of R3,287, you would need to earn:
Required Salary = Monthly Payment / 0.20
= R3,287 / 0.20
= R16,435 per month
This means you would need a gross salary of at least R16,435 per month to comfortably afford a R150,000 car on finance.
But Wait – There’s More to Consider
While the monthly repayment is a big part of the equation, it is not the only cost you will need to factor into your budget. Here are some additional expenses to keep in mind:
Insurance: Comprehensive car insurance is essential, and the cost will depend on factors such as your age, driving history, and the car’s value.
Fuel: Depending on your daily commute and the car’s fuel efficiency, this could add hundreds (or even thousands) of rands to your monthly expenses.
Maintenance and Repairs: Used cars may require more frequent maintenance, so it is wise to set aside a portion of your budget for servicing and unexpected repairs.
Licensing and Registration: Do not forget the annual licence fee and any registration costs.
These additional costs can easily add R2,000 + to your expenses, so make sure you account for them when planning your budget.
Why the 20% Rule Matters
Sticking to the 20% rule is crucial for maintaining financial stability. Spending too much on a car can leave you short on cash, making it difficult to cover other essentials such as rent, groceries, and savings.
For example, if you earn R16,435 per month and spend R3,287 on your car payment, you will have R13,148 left for everything else. If you add insurance, fuel, and maintenance, your total car-related expenses could consume 30-40% of your salary, leaving you with less flexibility for other priorities.
Is Financing a R150,000 Car Right for You?
If you earn R16,435 per month (or more), financing a R150,000 car could be a realistic option. However, if your salary is lower, you might want to consider:
Saving for a deposit: Putting down a deposit reduces the loan amount and lowers your monthly payments.
Choosing a cheaper car: Opting for a car priced below R150,000 can make financing more affordable.
Exploring shorter loan terms: A shorter loan term (e.g., 3 years) means higher monthly payments but less interest paid overall.
How Auction Finance Can Help
At Auction Finance, we specialise in helping clients structure deals that work for their unique financial situations. Whether you are looking to finance a used car, refinance an existing loan, or explore private-to-private finance options, our team is here to assist you every step of the way.
We understand that everyone’s financial circumstances are different, and we are committed to finding solutions that fit your budget and lifestyle.
Why Choose Auction Finance?
Tailored Finance Solutions: We work with you to structure a deal that suits your needs.
Refinance Options: Already have a car loan? We can help you refinance to better terms.
Private-to-Private Finance: Buying from a private seller? We have got you covered.
Final Thoughts
Financing a car is a significant financial commitment, but with careful planning, it is entirely achievable. If you are earning at least R16,435 per month, a R150,000 car could fit comfortably into your budget – as long as you account for all the additional costs and stick to the 20% rule.
And if you need expert advice or assistance, do not hesitate to reach out to Auction Finance. We are here to help you navigate the process and find the best deal for your situation.
Contact Auction Finance Today!
Let us assist you in structuring a deal that works for you. Whether it is buying on auction, refinancing, private-to-private finance, or finding the right loan terms, we have got the expertise to make it happen.
📞 Visit us at: www.auctionfinance.co.za
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Your dream car is within reach – let’s make it a reality!
