Why your car may be costing you more than you think — and what to do about it

As South African households battle rising debt, financial experts are warning that cars could be draining consumers’ budgets more than they realise.

An analysis of consumer trends has shown that more people are being urged to consider smaller, cheaper vehicles as financial pressure mounts. While many drivers focus on monthly instalments, advisors say the real cost of owning a car goes far beyond repayments.

Cars lose value — fast

Certified Financial Planner Paul Roelofse says one of the biggest problems is that cars depreciate rapidly, meaning they rarely help build wealth.

“The value of a car depreciates, and that’s the big problem,” Roelofse explained.

“You put it on your balance sheet expecting your assets to grow, but with a car, it goes the other way.”

He said most vehicles lose significant value in the first year, sometimes around 20%, while the loan balance remains high because early repayments are largely made up of interest.

This can leave consumers owing more than the car is worth.

It’s not just the instalment

Beyond depreciation, Roelofse warned that buyers often underestimate the long list of ongoing costs.

These include insurance, fuel and maintenance, particularly once service plans expire. Many motorists finance cars for five or six years, even though maintenance plans typically cover only the first three.

“That leaves you with years where you’re exposed to repair costs, and the more expensive the vehicle, the more expensive the parts,” he said.

Balloon payments are dangerous

Roelofse also cautioned against balloon payments or residuals, which reduce monthly instalments but increase long-term costs.

“If you’re taking a residual or a balloon payment, you’re buying a car you can’t afford,” he said.

While these structures make repayments appear cheaper, interest is still charged on the deferred amount. By the end of the term, consumers may face a large lump sum or be forced to refinance.

“The bank doesn’t give that to you for free. You still pay interest on it,” he added.

Smaller cars, smarter finances

Roelofse believes many households could benefit from reassessing their vehicle needs and spending less on cars overall.

“We spend far too much money on cars,” he said, adding that buying a cheaper vehicle and investing the savings elsewhere could significantly improve long-term financial security.

He urged consumers to carefully calculate the full cost of ownership, consider interest rate risks, and avoid stretching themselves financially for the sake of a more expensive car.

“It’s a nice feeling when you buy the car,” he said. “But you’re stuck with the problem for the rest of the term if you can’t really afford it.”

For more information, listen to Roelofse using the audio player below: