When the inflation rate is high, you get less car for your money.
Older people often speak about the “good old days” when they could go to the movies, get a meal, and buy milk and bread for under R5. If you’ve ever heard one of those stories, then you’re already on your way to understanding what inflation means.
Inflation is when money loses value over time, meaning that things are generally more expensive than they were a few years ago. Your ability to buy or finance a car may vary depending on the inflation rate, because the value of money changes with time. Many people decide to keep driving their current car until inflation rates are lower and car prices come down. On the down side, when vehicle prices are generally lower, your current car’s trade-in or resale value will also decrease – and driving the car for longer will also reduce its value.
Inflation is measured using a formula that results in an index. The South African Consumer Price Index records the average increase in the cost of things that you buy and services that you use. This gives you an idea of how much less you can buy with the same amount of money.
Whether you are shopping around for a new or used car or looking to trade in or sell your current vehicle, it’s important to keep up to date with the inflation rate. This will help you to estimate the long-term costs of vehicles more accurately. The more research you do, and the more knowledge you have, the more secure you can be in your decision to buy or sell a car.