A Beginner's Guide to Calculating Your Total Car Loan Repayment in South Africa
The Quick Answer
Your total car loan repayment is the sum of the original amount you borrowed (the principal) plus all the interest charged over the entire loan term. It's significantly more than just the car's sticker price. For example, a R 200,000.00 loan over 5 years at 12% interest could have a total repayment of over R 267,000.00.
What Makes Up Your Total Repayment?
It's not just the price of the car. The total amount you pay back is calculated using a few key components:
- Principal Loan Amount: This is the actual amount of money you borrow. It's the car's purchase price minus any deposit you pay upfront.
- Interest: This is the cost of borrowing money, expressed as an annual percentage rate (e.g., 11%). The interest is added to your loan balance, and you pay it off over the term.
- Loan Term: The length of time you take to pay back the loan, usually measured in months (e.g., 60 months for 5 years). A longer term means more interest is accumulated.
The Key Formula: How It's Calculated
Financial institutions use a complex formula called an amortisation calculation. Don't let the name intimidate you—the concept is simple. It means that each monthly payment covers part of the interest and part of the principal. Early in the loan, a larger portion of your payment goes toward interest. As time goes on, more of your payment goes toward paying down the principal amount.
While you don't need to memorise the formula, understanding this process explains why the total repayment is so much higher than the initial loan.
A Step-by-Step Walkthrough with a Real Example
Let's follow a typical scenario to see how the total repayment is built. Imagine you want to buy a car for R 250,000.00.
Step 1: Start with the Purchase Price
The starting point is the car's cash price. In our example, this is R 250,000.00.
Step 2: Subtract Your Deposit
A deposit reduces the amount you need to finance. Let's say you have a R 30,000.00 deposit.
Principal Loan Amount = Purchase Price - Deposit
R 250,000.00 - R 30,000.00 = R 220,000.00
This is the actual amount the bank lends you.
Step 3: Factor in the Interest Rate and Loan Term
Now, the bank will charge interest on that R 220,000.00. Assume an interest rate of 13% per annum and a loan term of 72 months (6 years).
Step 4: Calculate the Total Repayment
Using an amortisation formula (or our calculator!), we can find the total cost.
- Monthly Repayment: Approximately R 4,185.00
- Loan Term: 72 months
Total Repayment = Monthly Repayment x Number of Months
R 4,185.00 x 72 = R 301,320.00
Now, let's see the breakdown clearly:
| Component | Amount |
|---|---|
| Car Purchase Price | R 250,000.00 |
| Deposit Paid | R 30,000.00 |
| Amount Financed (Principal) | R 220,000.00 |
| Total Interest Paid | R 81,320.00 |
| Total Repayment (Principal + Interest) | R 301,320.00 |
How Different Factors Affect Your Total Repayment
Even small changes can have a big impact on the final amount you pay.
1. The Impact of a Higher Deposit
If you increased your deposit from R 30,000.00 to R 50,000.00 in the same example:
- Amount Financed becomes R 200,000.00.
- Total Repayment could drop to around R 274,000.00.
- You save over R 27,000.00!
2. The Impact of a Higher Interest Rate
If your interest rate was 15% instead of 13%:
- Your total repayment on the original R 220,000.00 loan could jump to over R 311,000.00.
- This highlights why a good credit score for a lower rate is so important.
Actionable Advice for Beginners
- Always Calculate the Total: Never decide based on the monthly payment alone. The total repayment reveals the real cost.
- Use Online Calculators: You don't need to be a maths expert. Use tools designed to do the complex calculations for you instantly.
- Play with the Numbers: Test how much a larger deposit or a shorter loan term can save you thousands of Rands.
Take the Guesswork Out of Your Car Loan
Understanding the total cost of your car loan is the first step to financial empowerment. It allows you to compare offers, negotiate better terms, and choose a plan that truly fits your budget without any nasty surprises down the road.
Ready to see the full picture for your dream car? Use our free and easy Car Finance Calculator right now. Just enter the purchase price, your deposit, and the estimated interest rate to get an instant breakdown of your monthly payment and, most importantly, your total repayment cost. It’s the smart way to start your car-buying journey.