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Wesbank Affordability Formula:
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The Wesbank affordability formula calculates the maximum car price you can afford based on your income, existing debts, and loan terms. It's widely used by South African financial institutions to determine vehicle financing eligibility.
The calculator uses the Wesbank affordability equation:
Where:
Explanation: The formula determines how much of your income can go toward a car payment after accounting for existing debts, then converts this to a total loan amount using the payment factor.
Details: Calculating affordability helps prevent overextension and ensures you choose a vehicle that fits your budget without compromising other financial obligations.
Tips: Enter your net monthly income, typical DTI ratio (start with 0.3), existing monthly debt payments, and the PMT factor (often around 0.021 for standard loan terms).
Q1: What is a typical DTI ratio for car loans?
A: Most lenders prefer a DTI below 30-35%, meaning your total debt payments (including the new car) shouldn't exceed 30-35% of your monthly income.
Q2: How do I find my PMT factor?
A: The PMT factor depends on interest rate and loan term. For a 5-year loan at 10% interest, the factor is approximately 0.021.
Q3: Should I include all debts in the calculation?
A: Yes, include all recurring monthly debt obligations like credit cards, personal loans, and other vehicle payments.
Q4: Does this include insurance and maintenance?
A: No, this calculation only determines loan affordability. You should budget separately for insurance, fuel, and maintenance costs.
Q5: How accurate is this calculator?
A: It provides a good estimate, but actual loan offers may vary based on credit history, exact interest rates, and lender policies.