Nicolette Dirk, finance writer, Justmoney.co.za
Vehicle owners feeling the pinch of the rising cost of fuel and interest rate hikes should focus on managing maintenance costs that eat away on monthly income.
Glenn Stead, head of products for vehicle and asset finance at Standard Bank, said consumers should look at the overall maintenance costs when considering buying a new vehicle – not just the monthly instalment repayments.
“Consumers need to be realistic about what they can afford. As vehicles depreciate in value, their running costs appreciate. As a guideline, costs of maintaining and running a vehicle should not exceed 30% of gross monthly income,” he said.
Fuel costs, which often vary depending on the length of the consumer’s daily commute, are one of the obvious costs. But there are the additional, less obvious costs that slowly add up, such as monthly insurance premiums, regular wear and tear on the vehicle and e-toll fees.
“Added together, these running costs could end up being double the monthly instalment value, or even equal the value of monthly repayments for a new vehicle in a higher price range,” said Stead.
Here are some tips to manage your vehicle maintenance costs:
• Fixed rate vehicle financing option – although it is marginally higher than the variable rate, by utilising this option vehicle owners can be assured that they will not be affected by further interest rate hikes. It may be better for the first time buyer to use this option.
• Reward programmes – reward programmes offer an opportunity for vehicle owners to save on their monthly running costs. By filling up at select filling stations, account holders can get back as much as R1 for every litre. For example, Standard Bank’s UCount Rewards programme has paid back R77 million in redemption points to customers through its fuel reimbursement option.
• Reduce bills without compromising insurance - Vehicle owners should not be tempted to compromise on their insurance options by either switching to an option with lower premiums, or cancelling their vehicle insurance completely.
“Many vehicle owners do not read the ‘fine print’ in their policies, which may contain exclusions such as high excess amounts. This can disadvantage them in the case of damage or loss of the vehicle,” said Stead.
Prospective vehicle owners should carefully examine the terms of their insurance contracts, to be clear on what is covered, and what isn’t.
• Understand the different types of vehicle financing products: Stead said it is important for vehicle buyers to understand the different types of vehicle financing options, and the financial implications of each.
This will include the implications of residual payments at the end of the contract’s term. Banks offer a range of options and solutions to assist customers facing financial pressure. This includes structuring a grace period for repayments.
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