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Steady increase in the cost of motoring

The interest rate cut and drop in petrol price during July is good news for consumers, however, the cost of motoring continues to rise steadily. The monthly mobility basket, which comprises of vehicle instalments, fuel, insurance and maintenance fees, has risen to R7,851.39. This is 3% higher than last year, and 28% higher than five years ago when monthly costs amounted to R6,144.22.

These costs are reflected by the WesBank Mobility Calculator, a tool that the bank uses to track and calculate motoring expenses. The total mobility basket comprises all the fees that are involved with vehicle ownership: a monthly instalment, the insurance premium, fuel and maintenance fees. These expenses are regularly updated to reflect inflation, interest rates and other fluctuating costs, and are based on an average entry-level vehicle that travels approximately 2,500 kilometres per month.

Vehicle instalments and fuel spend remain the largest portions of the monthly mobility basket, accounting for 80% of monthly mobility spend. However, when viewed as a portion of the monthly motoring budget, fuel spend is significantly less in 2019 compared to five years ago. Fuel spend accounts for 35% of the total this year, while vehicle instalments are 45%. This contrasts with the mobility basket in 2014, where fuel spend and vehicle instalments cost about the same amount.

“In 2014, fuel prices were on the rise and monthly fuel spend was roughly equal to an entry-level vehicle’s instalment,” says Ghana Msibi, WesBank Executive Head of Motor. “This is no longer the case, and despite monthly fuel price hikes from February to June 2019, this month’s fuel prices are actually lower than they were during July last year. This does not mean the cost of motoring is lower.”

Vehicle instalments and insurance premiums account for the highest increases over the past five years, mainly as a result of vehicle price inflation. From 2014 to 2019, vehicle instalments increased 43%, while insurance premiums grew 40%. In comparison, fuel spend and maintenance fees only grew 11% and 8% respectively over the same period.

WesBank’s data indicates favourable vehicle price inflation over the past year, with consumers only spending marginally more on new and used vehicles. In June, the average new vehicle financed through WesBank costs R321,715, while the average used vehicle costs R215,848. This reflects only a 3% and 2% year-on-year change for new and used vehicles respectively. However, the interest rate cut will be welcomed by consumers with vehicle and home finance.

“Interest rate cuts and lower fuel costs are always welcome, but this shouldn’t influence a vehicle purchase. Motorists should take a holistic view when planning a car purchase and ensure that their budgets include the instalment amount, insurance costs, fuel money and savings for maintenance and services. Their budgets should also be able to absorb higher costs a few years down the line. The smartest move is to plan for rising costs over the duration of the finance contract. Our mobility calculator is there to help consumers gauge the total costs associated with vehicle ownership,” concludes Msibi.

Story provided by Meropa Communications, on behalf of Wesbank.