“Unfortunately, this means that the costs will be borne by consumers and taxpayers, and that’s bad news in our market where consumers are already heavily indebted.”
WesBank provides the following tips:
Rising costs will slowly eat into monthly budgets, so consumers are urged to draw up a list of expenses and identify those that absolutely have to be there. Grocery bills, insurance premiums, car instalments and petrol are non-negotiable, while parties, shopping sprees and holidays are luxuries that could be saved up for or delayed.
“It’s important to have some breathing room in your budget so that you can easily afford higher fuel prices or a hike in your insurance premiums. These are monthly costs that don’t go away,” said Mahoney.
Keep a healthy credit record
Consumers who see that rising costs might be unmanageable can consider downgrading their vehicles and obtain a more affordable vehicle with lower monthly instalments and more affordable insurance premiums. This is best done before falling into arrears and having to make a payment arrangement with the bank.
“It’s difficult to downgrade your car, especially in a society where cars are status symbols. But it’s far more important to have a perfect credit record. In a few years, when the economy has started to recover and you are in a better financial position then your sterling credit record will help get you back into that flashy car,” said Mahoney.
Stay debt free
While it’s difficult to be completely free of debt, WesBank does advise consumers to pay off credit cards and loans as soon as possible – and also to avoid taking on any new debt. Not only will this make for a healthier credit profile, it also removes the temptation to use those credit facilities on unnecessary items.
“The smaller debts are easier to settle, and once you’ve paid them it’s best to close those accounts. Instead, look at saving money to buy items you want – or even use those savings as a deposit for your next car,” said Mahoney.
Be money wise
Low confidence levels might mean that consumers choose to hang on to their existing cars for longer, but it’s a reality that there are many first-time buyers who need cars – or consumers who simply have to get a replacement vehicle.
In these instances, WesBank has three bits of advice for potential buyers to structure their car loans: use a deposit, borrow as little as possible, and pay it off as soon as possible.
“A deposit definitely helps reduce your monthly instalment, which is good for your day-to-day budget. Borrowing as little as possible ensures that you live within your means. And paying off your loan in a shorter period like four years, instead of six, means that you pay less in interest fees,” said Mahoney.