IS A CAR AN INVESTMENT OR ASSET IN SOUTH AFRICA?

Disclaimer- I am not a financial advisor, I speak from my own personal experiences on what I encountered in Zimbabwe & South Africa during the last 22 years in the Insurance industry. I do have an accounting degree as well An Advanced Diploma in Insurance Management ( Fellowship Diploma) from The Insurance Institute of South Africa.

During the Zuma years especially around 2015 up to the time that he fired Nhlanhla Nene as the finance minister some of us who lived under Robert Mugabe years in Zimbabwe from 1997 when Zim dollar to 2008 when hundreds of thousands of Zimbabweans left for South Africa started to panic.

I saw the same signs I saw in Zimbabwe. I had joined the insurance industry in Zimbabwe at the end of 1997 and I can write books about the ravages of inflation. In a normal economy a vehicle is supposed to lose value and it is not considered an asset. Assets such as vehicles somehow traces the value of US$ as vehicles are imported. It is no secret that the Rand has lost its value over the last 10 years. In 2009 when we started building our house in Zimbabwe, for every R100 I could get $12.50 and now it is more like $7.

So my first car I bought in South Africa was a Toyota Tazz at the end of 2007 on finance for a price of R54 000. My monthly installment was around R1 200, I sold it in 2016 for R 32 500.00, after driving it for 9 years. When I left Zimbabwe in 2007 my allocated company car was a 2002 Toyota Hilux KZTE 3.0 D d/cab similar to the one in the photo below. You will be surprised that this 18 year old vehicle is being advertised for R139 000. Incidentally I once considered buying this vehicle in 2007 for the same price when I came to South Africa.

In 2014, I bought my first Hyundai H100 Bakkie for R90 000 on finance. A similar 2008 Bakkie is now being advertised for R100 000.00. Of course when you consider the time value of money R100 000 in 2020 is not the same as R90 000 in 2014. My point is that you can finance a car and use it ( very few of us can afford to buy a car cash) and still be able to dispose it for a decent some. With the state of public transport a vehicle is a necessity especially if you have a family. Maybe you wish to apply for home loan and one of the question is do you own a vehicle? Is the vehicle paid up? What is the value of the vehicle? Food for thought.

I don’t recommend buying a car on residual finance, there is no free lunch in this world.