At the current interest rate of 11.75%, you will pay over R331,000 in interest when financing a R1-million vehicle such as the new Ford Ranger Wildtrak X.
Interest rates in South Africa are presently at their highest point since mid-2009, and they will remain at this level until the next rate decision is made by the reserve bank in September.
The bank’s choice to keep lending rates at 11.75% for the next two months puts an end to a rate hike cycle that started in November 2021 and saw interest rates increase by 475 basis points (bp).
As such, this is how much interest you’ll pay on a vehicle finance contract at the current lending rate of 11.75%:
| Vehicle price | Monthly repayment | Total interest payable |
|---|---|---|
| R100,000 | R2,308 | R37,245 |
| R200,000 | R4,519 | R69,955 |
| R300,000 | R6,731 | R102,665 |
| R400,000 | R8,943 | R135,375 |
| R500,000 | R11,155 | R168,085 |
| R600,000 | R13,367 | R200,795 |
| R700,000 | R15,579 | R233,504 |
| R800,000 | R17,790 | R266,214 |
| R900,000 | R20,002 | R298,924 |
| R1,000,000 | R22,214 | R331,634 |
These calculations were based on a five-year contract with a 0% deposit and 0% balloon payment.
Concerningly, the compounding effects of the frequent interest rate increases mean buyers are paying almost double in total interest now than what they had to in July 2020, when rates stood at 7%.
A R100,000 contract would have necessitated R23,174 in payable interest three years ago, and a R1-million contract R192,439, an increase of between 67-72% in comparison to today.
Affordability is key
While the decision to keep rate hikes at bay, for now, was a welcome one, motorists who are financing their rides are under much more severe financial pressure than they were just one year ago.
Combined with harsh economic headwinds facing the majority of South African consumers, affordability has become a key consideration when it comes to buying new cars.
“The impact of the interest rate hikes since the relief experienced by consumers during Covid-19 has a greater effect and it is these increases that really begin to impact consumer debt in the longer term,” said Lebogang Gaoaketse, WesBank’s head of marketing and communication.
“The compounding effects of interest rate increases on car, home, credit card, and other debt repayments, are beginning to weigh heavily on consumers. Household debt levels in South Africa remain at high levels – with more than 62% of disposable income servicing debt.”
The rising interest rates and inflation, coupled with a deteriorating Rand hampered by the power crisis and geopolitical concerns, will see buyers either postpone vehicle purchases, buy down, or exit the new market altogether in order to find better value in the used market, he said.
Keyword: How much interest you pay on a R1-million car instalment plan