A monthly vehicle repayment, otherwise known as an instalment, is the amount you would pay each month if you were to buy a vehicle through a finance agreement.  

The different elements of a deal structure (such as the vehicle price, the payment term, deposit, interest rate and balloon payment) each affect the monthly repayment in different ways. 

You can calculate a monthly repayment (and the associated deal structure), with different levels of accuracy: 

Vehicle finance calculator

Use our vehicle finance calculator to get an immediate but loose idea of how a given purchase price would translate into a monthly repayment.

• This calculator will give you a general estimated deal structure based only on the vehicle's price, rather than your individual credit score.

Opting for a balloon payment as part of your finance agreement is a way of lowering your monthly repayments (instalments). 

A balloon amount is a lump-sum portion of a vehicle's total cost of credit, which becomes due at the end of a finance payment term (if you agreed to pay your car off over 72 repayments, the balloon amount will become due after the 72nd repayment). By taking some of what you owe on your car, separating it and leaving it for last, you make the preceding monthly payments more affordable. The bigger the balloon, the lower the repayment.

Sound complicated?

You can calculate how a balloon affects your deal structure here.

There are a few ways to settle a balloon payment. You can read about them here.

Finance providers have a legal responsibility to provide access to credit that is both fair and non-discriminatory. This is the main reason why you'll be assessed when you apply for any kind of formal credit (vehicle finance included). This need is represented in South African law by the National Credit Act.

As a registered credit provider, there are certain things on which we need to base our decision to grant you vehicle finance or not. The two main considerations are your affordability and your creditworthiness.

What is affordability?

In terms of formal credit, your affordability is a measure of how much you can reasonably manage as a new credit payment, such as a vehicle repayment. It is closely linked to your discretionary income. Your discretionary income is the amount of money you have leftover after deductions and necessary expenses. The higher the monthly repayment for a given vehicle, the higher your discretionary income (and therefore, your affordability) needs to be. 

What is creditworthiness

Your creditworthiness is how likely you are to pay the money you owe on time, based on your credit history. If your credit history shows that you can't be relied upon to pay back what you owe, then your chances of being approved for new credit are low, no matter how high your affordability is.

Interest in general terms

In its simplest terms, interest is the cost of borrowing money, or the cost of buying on credit (which is itself a kind of borrowing). Whenever you pay a person or company back with more than you originally borrowed from them, you are paying some form of interest.

In formal credit (such as vehicle finance), interest is normally charged over time, as a percentage of the amount owing. This is known as the interest rate. The longer you have an outstanding balance with your finance provider, the more interest you'll end up paying.

Vehicle finance interest

In a vehicle finance agreement, the amount that you borrow (to pay for your vehicle) is known as the amount to finance or principal debt. This is the amount of money on which interest is charged over time. The interest is factored into your monthly repayments so that by the end of your payment term, you've paid the total cost of credit.

The total cost of credit is the total amount of money that you end up paying during the duration of your vehicle finance agreement. Here's a simplistic breakdown:

    Amount to finance (principal debt)

    + total interest 

    + fees (initiation and monthly admin)

    = total cost of credit

Note: This example excludes additional fees you might incur (if you default on payments etc).

You can see this illustrated when you enter an amount into our vehicle finance calculator.

How much interest you end up paying depends mainly on the following factors:

• how much your principal debt is to start with;
• the given interest rate and whether it is fixed or linked;
• how long your repayment term is;
• whether or not you have a balloon payment; and
• whether or not you miss any payments during your finance agreement

Depending on your deal structure, affordability and credit profile, you may have two types of interest rate available to you: either fixed or linked (also referred to as variable). 

A fixed interest agreement

With a fixed interest vehicle finance agreement, the interest rate stays the same throughout the payment term, no matter how long that is (a typical payment term is anywhere between 12 and 72 months). 

The rate offered with fixed interest agreements is often higher than that offered with linked interest agreements, but it makes it easier to plan for because your monthly repayment amount stays the same.

A linked (variable) interest agreement

With a linked rate agreement, the interest rate is linked to the Prime lending rate, as determined by the South African Reserve Bank (SARB). This means that the amount you end up paying back for your vehicle is affected by any changes to the Prime lending rate. If the Prime lending rate goes up, so will your interest rate. In turn, your monthly repayment amount will also increase.

The potential benefit is that if the Prime interest rate is lowered, your interest rate will also be lowered and so your monthly repayment amount will decrease. The downside is that your monthly repayment amount can increase due to factors outside of your control.