JOHANNESBURG – The total fuel spend of an individual driving 2 500 kilometres every month has more than doubled during the past five years.
According to the WesBank Mobility Basket, a comparative measure of the monthly cost of financing, using and maintaining a vehicle over time, the monthly fuel spend of consumers has increased far more significantly than the other components of the basket since 2009.
The mobility basket tracks the monthly net instalment, running costs, insurance and fuel spend since 2007. In the current calendar year e-toll costs have also been added to the basket.
Rudolf Mahoney, head of research at WesBank, says the calculation assumes a cash price of R100 000 for a new vehicle in 2007, and compares the same new vehicle over time, adjusted for new vehicle price inflation as calculated by TransUnion Auto.
The average contract period in the WesBank book is used, and the vehicle is financed at a rate of prime plus 2% with no balloon payment. Fuel consumption is 7l/100km with an average driving distance of 2 500 km per month. Running costs and insurance are calculated in terms of the Automobile Association’s (AA) tariffs structure. The fuel price refers to inland 93 octane unleaded in February each year. E-toll charges for 2014 are capped at R450 per month.
According to this metric, total mobility cost has increased a whopping 51.5% to R6 591.96 since 2009.
Extremely tough year for the consumer
Historically low interest rates, low new vehicle price inflation and ever-increasing instalment contract periods, have kept monthly instalments fairly stable over the past few years.
Mahoney warns however, that the average contract period has reached approximately 68 months (2007:54) and that there is limited scope for this number to increase further.
Moreover, new vehicle price inflation is expected to exceed consumer price inflation this year, while the interest rate cycle has also started to turn.
Sydney Soundy, head of vehicle and asset finance at Standard Bank, says even with the recent 50 basis point increase in the repo rate, the interest rate environment remains favorable for vehicle finance.
However, this is likely to change with the upward movement of interest rates anticipated in the course of the year, he says.
Consumers are already starting to feel the pinch.
Mahoney says the average loan amount granted has dropped R12 000 since December to reach R234 379 in January, an indication of the continuation of the buy-down trend.
WesBank has also seen a marked increase in finance applications for used vehicles.
According to unaudited figures released by the Department of Trade and Industry (dti) on Monday, new vehicle sales declined by 6.8% year-on-year to 53 025 vehicles in January.
Last month, the National Association of Automobile Manufacturers of South Africa (Naamsa) said it expects new vehicle sales growth of 0.2% for 2014.