So you’ve finally got that pay raise you’ve been waiting for and you’re considering rewarding your hard work with a new set of wheels. Congratulations! But before you head off to the dealership, we’d like to give you some advice on how to work out whether you can, in fact, afford the car you desire.

There are many costs to consider when buying a new car, including installments, vehicle insurance, fuel and wear and tear – all of which will help you determine your overall cost.

Vehicle installments

Most vehicle manufacturers will advertise a minimum vehicle installment price, which will often exclude some essential expenses. Remember to factor in things like VAT, registration fees, motor plans and extended warranties. All of these can significantly increase the overall costs and push you well over your maximum monthly budget.

Another consideration is that advertised instalments are usually worked out on the maximum repayment term (usually around 72 months). A longer length of repayment will decrease your monthly instalment, however, it will also result in you paying far more interest over time on what is almost inevitably a depreciating asset.

Vehicle insurance quotes

According to Wheels24, the percentage of vehicles insured on South Africa’s roads sits at just 35 percent. That means that two out of every three cars are not insured! A scary statistic considering the number of accidents that occur daily on South African roads.

Many people will tell you that they simply cannot afford the vehicle insurance South Africa has to offer, but if you cannot afford to pay for insurance, what makes you think you can afford the costs of replacing the vehicle, either yours or a third party’s? Could you afford not having a car for any length of time? For this reason, it’s wise to include several quotes from vehicle insurance companies into the overall costing for budgeting purposes.

Many insurers will also offer a vehicle insurance calculator that will help you to estimate the monthly expense of the car insurance. This will factor in your age, risk factor, as well as the make, model and value of the vehicle you wish the purchase.

The rising cost of fuel

Considering that six years ago (2010) the petrol price stood at R7.36 per litre, then we can safely assume, given that it currently hovers around R14.50 to the litre in 2016, that if you are factoring the current fuel price in to your maximum budget, then you will in all likelihood, end up exceeding that budget in the near future. By the time you make your final instalment on your vehicle, the petrol price could well have doubled.

Of course, by the time you pay that final installment, you would hopefully be earning a lot more money too, however, it’s best to steer on the side of caution, as the last thing you’ll want is to not be able to pay your instalments and get yourself into further unexpected debt.