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Unveiling the Hidden Costs of Car Ownership in South Africa

Shaun Marshall — Mon, 12 Feb 2024 10:04:32 +0000

Escalating Costs: The article highlights the significant increase in expenses associated with car ownership in South Africa, surpassing initial purchase prices by 55%, due to rising fuel prices, insurance premiums, and maintenance costs.
Economic Challenges: South African consumers face relentless economic challenges, including interest rate hikes, inflationary pressures, and escalating living costs, which further strain household budgets and necessitate careful financial planning.
Budgeting Advice: With petrol prices surging, insurance premiums rising, and maintenance expenses escalating, consumers are advised to exercise caution in budgeting, leaving room for potential cost increases to ensure long-term financial sustainability.

In recent years, South African consumers have faced relentless economic challenges, with inflationary pressures and escalating living costs squeezing household budgets. The burden extends to car ownership, where the true expenses far surpass the initial purchase price. As petrol prices surge, the rand weakens, and inflation bites deeper, a sobering reality emerges: owning a car demands more than just monthly repayments.

A study conducted by Naked Insurance sheds light on the hidden costs of owning a vehicle, particularly in the South African context. According to their analysis, the total expenditure for maintaining a new car valued at approximately R350,000, including fuel, insurance, and maintenance, surpasses the typical monthly repayment by a staggering 55%. This revelation underscores the necessity for consumers to adopt a more comprehensive approach to budgeting, factoring in all associated expenses.

The financial landscape for South African consumers has been tumultuous, marked by interest rate hikes and persistent inflationary pressures. Despite belt-tightening measures, relief remains elusive, amplifying the financial strain on households across the nation. The relentless surge in petrol prices, soaring by over 47% since February 2021, exacerbates the financial burden, further compounded by electricity challenges and escalating food costs. As disposable income dwindles, meeting mortgage payments, car loans, and credit card obligations becomes increasingly challenging, prompting consumers to seek additional sources of income to service their debts.

In this economic climate, individuals are compelled to scrutinise their expenditure meticulously, with particular attention to the costs associated with vehicle ownership. Ernest North, co-founder of Naked Insurance, highlights the stark reality of escalating car ownership expenses over the past two years. TransUnion’s latest vehicle pricing index (VPI) corroborates this assertion, revealing an average loan size of approximately R359,000 for new cars in South Africa.

Delving into specifics, Naked Insurance examines the actual cost of owning a typical car, as defined by TransUnion, in South Africa as of February 2024. Their analysis focuses on financing a new VW Polo 1.0 TSI, priced at around R348,200. While cash payment remains an option for some, the majority resort to financing options, often accompanied by a cash deposit. A typical five-year repayment plan, with a 10% deposit and an interest rate of 13%, translates to a monthly payment of approximately R7,222.

However, the financial commitment doesn’t end there. Fuel expenses constitute a significant portion of the overall cost of ownership. Calculating an approximate petrol bill entails considering fuel consumption and monthly travel distance. With petrol prices hovering around R23 per litre, a car with a consumption rate of just below 20km per litre would incur approximately R1,150 for every 1,000 kilometres travelled. Yet, the volatility of petrol prices underscores the need for flexibility in budgeting to accommodate fluctuations.

Insurance is another non-negotiable expense, particularly for those securing loans for vehicle purchases. Comprehensive car insurance is typically mandatory, safeguarding against potential losses and liabilities. While premiums vary based on individual risk profiles, estimates suggest an average monthly premium of R970 for a VW Polo.

Furthermore, budgeting for repairs and maintenance is imperative to mitigate unforeseen expenses. Despite service plans, additional costs for consumables and major repairs must be considered. On average, maintenance expenses amount to roughly 2% of the car’s value annually, equating to approximately R6,900 for a car valued at R348,000. For vehicles without warranty coverage, additional budget allocation ranging from R7,500 to R15,000 annually is prudent to cover servicing and unexpected breakdowns.

Summing up the expenses, driving a modest car over 1,000 kilometres per month translates to annual costs exceeding R134,000. Over the five-year financing period, total expenses escalate to approximately R670,000. However, upon completion of the repayment term, the car’s residual value is estimated at around R165,000, resulting in a net cost of approximately R505,000 for ownership.

Ernest North advises consumers to exercise caution in budgeting, recommending a buffer to account for potential increases in petrol prices, insurance premiums, and maintenance costs. The accompanying table outlines the estimated monthly expenses for owning and driving a new VW Polo 1.0 TSI, providing valuable insights for South African consumers navigating the complex terrain of car ownership.

Expense Cost Car payment R7,222 Fuel R1,150 Insurance R970 Long-term maintenance (average per month) R575 Services & unforeseen maintenance R1,250 Average cost per month R11,167 Total after 60 months R670,020

In conclusion, the true cost of owning a car extends far beyond the initial purchase price, demanding meticulous budgeting and prudent financial management. As economic uncertainties persist, South African consumers must heed the insights provided and adopt a holistic approach to car ownership, ensuring long-term financial sustainability amidst challenging times.

Source: RateWeb

Pothole claims are mounting

Shaun Marshall — Mon, 02 Oct 2023 13:54:11 +0000

Potholes – a common sign that a road is deteriorating – are widespread throughout South Africa. According to the South African Roads Federation (SARF), South Africa is home to 25 million potholes, 10 million more than there were five years ago.

Recently, Dialdirect noted a 15% increase in pothole-related accident claims and a 9% increase in tyre damage claims that are as a direct result of a pothole. In 76% of these claims, the pothole damage was so severe, it rendered the car un-driveable.

In South Africa, the majority of pothole-related claims come from the cities of Pietermaritzburg (21%), Pretoria (20%), Potchefstroom (17%), Bloemfontein (15%), Johannesburg (14%) and Durban (13%). Most of these pothole-related claims are logged from incidents that occurred during off-peak traffic times when motorists tend to drive a bit faster.

“Dodging potholes has fast become a professional sport but doing so can, and sometimes does, result in car accidents. Even if hitting a pothole doesn’t cause an accident, the damage is immense. One bad patch of road could lead to punctures, tyre bulges, bad wheel alignment and balancing, uneven tyre wear, cracked rims, damaged undercarriage, damaged tyre walls and blowouts,” saID Martin van Wyk from Dialdirect Insurance.

Traditionally, if a motorist sustains damage to their car after driving over a pothole, they could seek compensation directly from either the South African National Roads Agency (SANRAL) or their local road agency, depending on which road they were driving on at the time of the incident.

“Each road agency has its own procedure and if, for some reason, you have claimed from the wrong agency or failed to submit the right information, your case could be rejected or delayed. A successful claim depends on whether there was negligence on the part of the roads or municipal authority in not repairing that pothole, thereby removing a clear and present danger to the road user. In response to the time it takes to claim for pothole damage from road agencies, and the pothole issue at large, Dialdirect has included dedicated Pothole Insurance within its tyre and rim product, which covers accidental damage/loss caused by uneven road surfaces and potholes,” said van Wyk.

Dialdirect provides the following guidelines for navigating poorly maintained roads:

Your car

Proactive maintenance:
On spec:
Profile carefully:
Emergency kit:

Your driving

Alert & aware:
Heavy loads, rough roads:
Cuts like a knife:
Slow it down:
Undercover threats:
Brake and steer smart:

In the event of an incident or accident

Don’t assume that it’s just a minor damage. Stop when it is safe to do so to make sure.
Switch on your hazard lights and, if possible and legal, pull into the emergency lane.
Make sure that your vehicle remains visible – make use of your emergency triangle.
Call emergency services and your insurer for assistance.

Source: IOL

Tyre insurance: Another blow for motorists already feeling the pressure

Shaun Marshall — Mon, 07 Nov 2022 11:13:14 +0000

Several insurance companies simply cannot keep up with the amount of claims and are losing money because of the poor state of the country’s roads.

MOTORISTS are in for another rude awakening and this time, it’s not at the pumps.

If you have tyre insurance you may not have it for much longer. One of the biggest underwriters in the insurance industry, Hollard, has cancelled some of its tyre insurance offers, saying they simply cannot keep up with the amount of claims and are losing money because of the poor state of the country’s roads.

But the company said its MotoVantage products are still on offer and more popular than ever. As every car owner knows, the cost of a new set of wheels can leave a painful dent in the bank balance.

Roads agencies said they were not aware of the move by some insurance providers. Many of the country’s roads have become a veritable obstacle course for motorists to navigate.

The South African National Roads Agency SOC Ltd (Sanral) expressed surprise at the news.

“If it doesn’t concern national roads, then I’m afraid Sanral would not be aware of this,” a statement read.

The Johannesburg Roads Agency’s (JRA) CEO, Dr Tshepo Mahanuke was as surprised.

“We are very aware of the condition of the City’s roads and our Visual Condition Assessments (VCA) of the City’s road network indicates that a structured approach to road management is required in not only maintaining but also in upgrading our 13,599km road network.

“Our response plan to the state of the roads prioritises the preservation of existing road infrastructure, keeping it in good condition and not allowing it to deteriorate to a poor condition.

“Over the past four months, not only have we had a concerted drive to implement proactive maintenance, including pothole repairs and crack sealing, but the JRA’s R100m road resurfacing programme for the 2022/23 financial year (which started in July) is currently under way,” he said.

Anneli Retief, head of Dialdirect, said they too noticed a spike in tyre and rim claims.

“Steep claim increases have been observed in Gauteng, KwaZulu-Natal and Mpumalanga. This is a significant increase and badly maintained roads are a serious concern,” she said. “One bad patch of road could lead to punctures, tyre bulges, bad wheel alignment and balancing, uneven tyre wear, cracked rims, damaged undercarriage, damaged tyre walls and blowouts, which could very well cost you your life.

Saied Solomons, president of the South African Road Federation (SARF), recently stated that roads that are not timeously and properly maintained are costing South Africa millions, with costs soaring even higher when a lack of maintenance sees a road rapidly deteriorating to the point of requiring total road rehabilitation.

“That said, this is exactly what insurance is for. We are trying to help, and are making a difference through our Pothole Patrol initiative which has fixed more than 130,000 potholes to date.”

TiAuto Retail channel executive, Chris Farrar said: “Sadly, it is true that Hollard has, per their policy T&C with TiAuto, has decided to terminate the much-loved Xsure™ Tyre Guarantee and MoreSure™ Tyre Guarantee products. It is especially sad for the Retail Brands of Tiger Wheel & Tyre® and Tyres & More® which have proudly been marketing these value offerings to retail clients for over 30 years alongside Hollard. The reason for Hollard’s decision is simple, the loss ratio has just become prohibitive.”

But Farrar said the good news is that they are currently working on a new product offering.

Meanwhile, Mahanuke said a number of major roads have been resurfaced including Columbine Avenue, in the South of Johannesburg as well as one of the major routes leading towards Soweto. Key arterial routes in the MIdrand area have also been resurfaced. Other roads upgraded include the M2 and M1, parts of Sandton Drive, Grayston Drive, Glenhove offramp and Far Eastbank Drive.

He stressed that pothole repairs are a short-term fix and that resurfacing and/or reconstruction of roads remain the long-term solutions to improving the condition of the road network.

“Roads resurfacing involves putting new asphalt or tar overlays on top of roads, to improve the riding surface and to prevent water from getting into the underlying structural layers, which causes potholes to form. As an interim solution, roads that have deteriorated but do not meet the criteria for prioritisation within the available funding will undergo routine maintenance.”

“Potholes are formed when the rock structural layers of the road (beneath the tar) fail. This is usually due to water getting into the structural layer and washing out particles of rock, which causes localised collapsing of the structural layer. This explains why there are always more potholes after heavy rains.

“In addition, structural layers of roads which are old and which have not been well-maintained, or which are subject to a large volume of heavy trucks, can become weak and start to break up, causing potholes to form.

“R116,155,662.80 was paid in respect of JRA public liability claims for the period 2021/2022 financial year.”

Mahanuke said the public may lodge claims with the JRA’s Legal Department but added that the claims process does take time. He said the agency is working tirelessly to ensure roads stay in good condition during the upcoming holiday season.

“The public can help us by ensuring they do not litter, stormwater drains and low lying bridges become blocked by debris and litter and the rainwater pools on the roads posing a danger for road users,” Mahanuke said.

Meanwhile, Tyremart director of strategic development and marketing David Harrington said while they have experienced an increase in claims over the past year, they ascribe the increase to a return to “normalisation” after the Covid lockdown and restrictions.

“We have certainly not seen a spike in claims. Our claims are at the same levels as they were prior to Covid. We have no intention to withdraw the insurance and/or the guarantee,” he said.

Source: DFA