Picture: THINKSTOCK
Picture: THINKSTOCK

FOLLOWING the festive season splurge, South Africans may be tempted to stretch their budget to its limit to cover the monthly instalments of their dream car.

However, along with the deposit and instalments, depreciation of the rand, increasing cost of living and the uncertain ratings outlook all have to be taken into consideration before making this commitment.

This is according to Kerry Cassel, MD of Imperial Group’s MotorHappy, who says while this may seem to be the perfect time to upgrade the car to the latest model, South Africans may not consider their true budget or all of their options.

"We need to factor in that the cost of living may continue to increase, meaning that we will be paying more for everything from food to petrol. With this in mind, a budget which makes a tight provision for car payments may be unrealistic in the future.

"While new cars are affordable for some, a large portion of South Africans may need to look to the used car market."

Economic pressures have resulted in an increased demand for used cars. The TransUnion Vehicle Pricing Index (VPI) highlighted that, in the third quarter of last year, the ratio of new to used vehicles financed widened to 1.83 on a year-on-year basis. That is 1.83 used vehicles to every one new vehicle sold.

"For some motorists, looking after their current car is their only option," says Cassel.

Along with the monthly instalments of a financed car, Cassel says it is also essential to budget for protection. This protection includes insurance and servicing or maintenance and warranty provision.

"Not only should you get your car insured before you drive it off the dealership floor — to avoid serious financial and lifestyle implications such as having to pay off a written-off car while being stuck without reliable transportation — but you should also provide for servicing and maintenance to your check list.

"All cars differ in terms of servicing and maintenance costs. Before you make your final decision on which is best for you, find out what the average service cost of the car would be and work out if this fits in your budget.

"Alternatively, you could invest in a maintenance plan or an extended warranty."

Cassel emphasises that for those who are unable to afford a new car but whose current motoring plans are coming to an end, this does not have to be the end of reliable servicing or maintenance payments. "You do have an alternative option to paying your fluctuating servicing bills by extending your service plan.

"It is especially important for those looking to buy a used car to do some research online regarding the average value of the car they are interested in buying. Finding out whether or not your shortlisted car has a full service history or a warranty in place is one of the most important aspects to take into account.

"When buying a used car, you want to know that the previous owner showed it the attention it deserves — as recommended by its manufacturer — and you will be covered for future expenses," Cassel says.