In the last week of March, the South
African Reserve Bank announced a fur-
ther 50 basis points hike in the repo rate,
the second increase for the year and
one which sees the repo rate increase
to 7.75% while the current prime lending
rate shifts to 11.25%, the highest it has
been since 2009.
These increases directly affect
persons and businesses paying off loans
such as vehicle finance, which is coupled
to the interest rate, as the monthly
repayment amount will increase. This lat-
est announcement tightens the screws
even further in an economy where
consumers and businesses are already
under pressure.
The effect that this increase will have
on vehicle repayment amounts depends
on whether your agreement includes a
fixed interest rate or a linked interest rate,
and those customers who initially opted
for a fixed interest rate will be unaffected
by fluctuations in the repo rate.
Unfortunately, those that opted for a
linked interest rate, something popular
a few years ago when the interest rate
was low, now find themselves with
substantially higher repayment amounts.
When applied to a large fleet of vehicles,
this can result in hundreds of thousands
of rands of additional debt repayment
costs that were not budgeted for.
The result of rising interest rates and
inflation, due to the deteriorating rand
as well as a variety of other geopolitical
factors, is longer ownership cycles with
fleet buyers postponing new vehicle
purchases, buying down or even looking
to the pre-owned market.
The increasing trend of fleet owners
keeping their vehicle’s for longer and
clocking up additional mileage across the
lifespan of a vehicles working life means
that it is more important than ever for
fleet owners to buy quality products and
products that are accompanied by quality
backup throughout the ownership cycle.
BUSINESS
‘Aside from structuring
a finance deal that is
right for your business,
the positive ownership
experience that comes
with buying quality
products is a more
important factor
than ever before.’
Protecting your investment
BUSINESS FLEET AFRICA | April 2023
WWW.BUSINESSFLEETAFRICA.CO.ZA