Buying a car is a significant financial decision, especially for first-time buyers. With rising vehicle prices and various financing options available, understanding what car you can realistically afford based on your income is essential. In South Africa, affordability is a key factor that lenders and financial advisors use to help buyers make sustainable choices. This guide breaks down how to calculate your car affordability using your salary, monthly obligations, and financing conditions.
Why Affordability Matters When Buying a Car
Affordability is more than just being able to make the monthly car instalment. It includes all the associated costs of car ownership—insurance, fuel, maintenance, and even depreciation. Overstretching your budget can lead to loan defaults and added financial stress.
Lenders assess affordability before granting a car loan, and buyers should do the same before committing to a purchase.
Industry Guidelines: The 20/4/10 Rule
In South Africa, many financial advisors refer to the 20/4/10 rule to help buyers determine a safe affordability range:
- 20% Down Payment – You should aim to pay at least 20% of the car’s price as a deposit.
- 4-Year Loan Term – The loan should ideally not exceed four years.
- 10% of Gross Income – Your monthly car-related expenses should not exceed 10% of your gross monthly income.
While this is a guideline and not a hard rule, it offers a practical baseline to keep your finances balanced.
Step-by-Step: How to Calculate What Car You Can Afford
Step 1: Know Your Gross Monthly Salary
Your gross income is the amount you earn before deductions like tax, UIF, or medical aid. If you earn R20,000 gross per month, you can generally afford to spend about R2,000 per month on car expenses.
Step 2: Determine Your Net Salary
Your net salary is what you take home after deductions. This figure is important because it reflects what you actually have available to cover instalments and vehicle-related costs.
Step 3: Calculate Your Monthly Expenses
Include the following in your monthly budget:
- Rent or bond repayment
- Utilities
- Food and groceries
- Insurance (including car insurance)
- Loan repayments
- Transport and fuel
- Entertainment and savings
Subtract this from your net salary to see how much you can realistically allocate toward car instalments.
Car Loan Affordability Based on Salary Ranges
To give you an idea of what you can afford, here’s an example breakdown of vehicle affordability for different salary brackets in South Africa.
| Gross Monthly Salary | Estimated Monthly Car Budget (10%) | Car Price Range (Over 60 months) |
| R10,000 | R1,000 | R60,000 – R90,000 |
| R15,000 | R1,500 | R90,000 – R130,000 |
| R20,000 | R2,000 | R120,000 – R180,000 |
| R30,000 | R3,000 | R180,000 – R270,000 |
| R40,000 | R4,000 | R240,000 – R350,000 |
Note: This is a simplified estimate assuming a 10% interest rate, no deposit, and a 60-month term. Actual affordability depends on your credit score, deposit, interest rate, and expenses.
Vehicle Finance Options in South Africa
1. Bank Car Loans
Banks are the most common source of car loans. They offer secured loans based on the car’s value and your credit profile. A strong credit score may qualify you for better interest rates.
2. Vehicle Finance through Dealerships
Dealerships often partner with banks or finance houses to offer in-house financing. While convenient, the interest rates may be higher compared to direct bank financing.
3. Balloon Payment Deals
This option allows for lower monthly instalments by deferring a large portion of the loan (typically 30%-40%) to the end of the loan term. However, it creates a large final payment, which must be paid in full or refinanced.
4. Personal Loans
A personal loan can be used to buy a car, especially second-hand vehicles. These loans are usually unsecured and may have higher interest rates.
Total Cost of Ownership
1. Car Insurance
Mandatory for financed cars. Comprehensive insurance can cost anywhere between R800 and R2,500 per month, depending on the car type and your profile.
2. Fuel
Your fuel bill depends on your car’s consumption and how much you drive. On average, South Africans spend between R1,500 and R3,000 on fuel monthly.
3. Maintenance and Repairs
Service plans may cover this initially, but once they expire, you’re responsible for regular maintenance, tyre replacement, and unexpected repairs.
4. Licensing and Registration
Annual car licence fees range from R300 to R2,000 depending on the car’s weight and class.
5. Tracker or Security System
Required by many insurers, adding an additional monthly cost.
Tips to Maximise Affordability
1. Save for a Bigger Deposit
A larger deposit reduces your loan amount and interest, making instalments more manageable.
2. Choose a Fuel-Efficient Vehicle
Fuel is a recurring cost, and more efficient cars reduce long-term expenses.
3. Compare Financing Offers
Get multiple quotes from banks, online lenders, and dealership partners to find the best interest rate and repayment terms.
4. Check Your Credit Score
Improving your credit score can qualify you for lower interest rates and higher loan amounts.
5. Consider Buying Pre-Owned
Used vehicles are significantly cheaper, and you avoid the steep depreciation of brand-new cars. Make sure the vehicle is in good condition and not older than the bank’s age limit for financing.
Understanding Vehicle Depreciation
A car loses value over time. On average, a new car depreciates by 20% to 30% in the first year and by about 50% after five years. Consider this when buying a high-end car on a modest salary—it may cost you more in the long term than it’s worth.
Buying a vehicle that holds its value better (like certain brands known for resale value) helps you recover more money when it’s time to sell or trade in.
When to Reconsider Buying a Car
If your budget is already stretched by rent, existing debt, or family obligations, adding a car loan may lead to over-indebtedness. In such cases, consider using public transport, ride-hailing apps, or delaying the purchase until your financial situation improves.
Summary Table: What to Consider Before Buying a Car
| Factor | Recommendation |
| Monthly Car Budget | ≤10% of gross income |
| Loan Term | Maximum 60 months, ideally 48 months |
| Deposit | At least 10–20% of vehicle price |
| Credit Score | Check before applying for financing |
| Monthly Car Ownership Costs | Include insurance, fuel, maintenance, licence fees |
