In the previous article of this 3-part series, we shared some tips to help you choose between a new or used car that’s reliable, suits your needs and fits your budget. In this final article, we’ll give you some car budgeting tips that show you how to keep up with your monthly repayments, including tips to pay it off faster.
Save by paying a little more
Use any extra money you have towards paying off your car – even before you start saving towards another goal. The interest rates on debt tend to be much higher than interest rates on savings accounts, so you could spend more on paying off interest in the long term than you would earn by saving.
Car budgeting tip 1: If you get a tax refund, a bonus at the end of the year or birthday money, put that extra income into your loan. Again, it will help you lower the overall repayment amount so that you pay less interest and shorten the term of your loan.
Car budgeting tip 2: Interest accumulates and compounds over time. If you can, pay your loan every 2 weeks instead of just once a month. You’ll save in the long run because the interest has less time to add up. First check with your credit provider if this is allowed.
By paying as little as R100 extra every month towards your car, you can save thousands over the long term. Here is an example of a car which costs R100 000:
R100 000 loan with no deposit
| Loan amount | R100 000 |
| Interest rate | 12% |
| Loan period | 5 years |
| Monthly payment | R2 224,44 |
| Number of payments | 60 |
| Total interest | R33 466,69 |
| Savings | R0 |
Paying R100 extra per month
| Monthly payments | R2 224,44 |
| Scheduled number of payments | 60 |
| Actual number of payments | 57 |
| Total amount of early payments | R5 700 |
| Total interest | R31 402,73 |
| Savings | R2 063,96 |
Paying R500 extra per month
| Monthly payments | R2 224,44 |
| Scheduled number of payments | 60 |
| Actual number of payments | 46 |
| Total amount of early payments | R23 000 |
| Total interest | R25 227,54 |
| Savings | R8 239,15 |
Don’t skip any payments
If you miss any of your monthly repayments, you will end up paying more on your car over the long term because of the interest you have to pay over and above the loan amount. To avoid this, set up a debit order to pay your loan account as soon as your salary comes in. This way you also won’t be tempted to skip a payment to spend the money on something else. Also remember that if you miss too many payments, your car could be repossessed, which could also damage your credit score – so avoid this at all costs.
Car budgeting tip 4: If you are struggling to pay your instalments, you can consider consolidating all your debt into one loan – which means you’ll have one monthly repayment amount instead of several. Before you consolidate, remember that although your total monthly repayment amount will be less, the consolidation loan may have a longer term. That means you could end up paying more interest in the long run.
Maintain your car
Look after your car to avoid costly and unexpected repairs. It will also help keep its resale value higher if you want to trade it in for another car in the future.
Check your car’s oil, water and tyres regularly Checking these things regularly gives you a good basic indication of whether your car is in good running order and could save you from costly repairs. If your car runs out of oil, the engine can be damaged, which could be expensive to repair. So always make sure you are topped up.
Car budgeting tip 5: You can save money on oil by buying your own at a store and keeping it in your boot.
Service your car regularly
You should get your car serviced at least every 10 000km to 15 000km you drive, or once every 12 months. A good mechanic will check the overall condition of your car. Remember to also check the suspension system, e.g. shock absorbers, etc.
Car budgeting tip: Find a reliable mechanic or service centre by reading online reviews or asking friends or family for recommendations.
Action your big goals
Setting realistic annual goals is a great way to help build the life and career you want. The more practical and informed your approach, the more likely you are to achieve your dreams. We’d like to help you reach at least one goal this year, so we’ve created a 3-part series of handy checklists for 4 major financial goals. Whether you want to save for your education, a dream holiday or buy a car or buy a new home, we’ve got you covered.
