Ask the average person in South Africa what they know about our car industry and there’s a good chance they’ll tell you we pay more for our cars than buyers from other countries.

In fact, cars in many other countries – and the costs of driving them – are more expensive than they are here. Nonetheless, hefty import taxes and the weak rand are continuing to push new car prices beyond the reach of South Africans.

Comparing South Africa to elsewhere: Costs of car ownership

According to The Telegraph, South Africa is comparatively “easy on the motorist’s pockets.” As an example, they cited the cost of a VW Hatchback in 2016 as £23,283 (given the current exchange rate, about R389,354) in the United States, £12,362 (about R206,726) in Brazil or £10,460 (about R174,919) in South Africa.

It’s not just selling prices that count though. A number of factors, from petrol prices and maintenance costs to road quality and traffic congestion levels, affect the total cost of car ownership.

Survey results published in The Telegraph listed the average cost of buying an economy car and running it for one year in different countries. From most to least expensive, these were the results:

1. USA: £24,662 (R412,414)
2. UK: £18,901 (R316,075)
3. Venezuela: £17,674 (R295,556)
4. Japan: £16,576 (R277,195)
5. Germany: £16,432 (R274,787)
6. United Arab Emirates: £15,055 (R251,759)
7. Brazil: £13,770 (R230,271)
8. Australia: £13,480 (R225,422)
9. Russia: £11,605 (R194,066)
10. South Africa: £11,221 (R187,645)
11. India: £8,768 (R146,624)

What’s pushing up new car prices in South Africa

The cost of driving and maintaining a car might be higher in other countries, but initial vehicle selling prices in South Africa are still significantly inflated – and lower running costs mean little if consumers can’t afford to buy cars in the first place.

We review some of the factors contributing to high car prices.

Taxation

A number of taxes are levied on imported vehicles. Shockingly, the final tax that’s payable can be as high as 45% of a car’s total price.

Cars assembled in South Africa don’t necessarily escape these taxes either, because they’re also levied on imported parts and components.

It’s true that in other countries, people also pay various taxes on new vehicles, but often these taxes aren’t as high. Also, import taxes don’t apply within specific regions. If you’re in an EU country, for example, vehicles imported from other EU countries aren’t subject to import tax.

Model specifications

The “extras” that come with particular car models change dramatically from country to country.

In South Africa, entry-level cars tend to include a higher than average number of extra features. Consumers expect or even demand anti-lock braking systems (ABS), airbags, air conditioning and sound systems.

In higher-end cars, buyers may expect a range of luxury extras – from Bluetooth integration and cruise control to parking sensors and leather seats – as standard features.

In other countries, many of these features are offered as optional extras. This gives consumers the option of paying less for vehicles, minus some of the frills.

Increasingly, lower specification models aren’t being imported into South Africa and so aren’t available as cost-effective alternatives.

The weak rand

The weakening of the rand has caused new vehicle prices to skyrocket.

Almost overnight, the price of an imported vehicle may rise by tens of thousands of rand because of a simple exchange rate fluctuation. As a simple example, say a car costs US$30,000. At a dollar to rand exchange rate of 13 to 1, that’s R390,000. Increase the exchange rate to 14 to 1, and the converted value is R420,000.

From 2015 to now, the rand has lost significant value to the dollar, the euro and other key currencies. As a result, increases in new car prices have been well above general inflation.

Built-in service plans

Some manufacturers include a built-in service plan with each vehicle sale in South Africa. This may add significantly to the price you pay.

For example, in the United States, a brand new BMW won’t necessarily come with any kind of service plan unless you purchase one. In South Africa, a BMW comes with a built-in five-year/100,000 km Motorplan that’s valued at R50,000 – effectively inflating the selling price by that amount.

Is there a solution?

The problem of over-priced new vehicles in South Africa isn’t a new one – and ultimately, it’s hurting the new car industry as well as consumers.

Even the National Association of Automobile Manufacturers (NAAMSA) has argued that it’s time to do something about high taxes on imported cars and car parts.

For now, increasing numbers of consumers who were previously in the market for new cars are turning to the second-hand market.

Your paid off car – whether new or second-hand – is one of your most valuable assets. At Pawn My Car, we offer a modern, convenient and safe way to secure a loan using your car, with no delays. For more information, contact us on 086 172 9648 or simply complete and submit our online application form. 

Complete an application now