Repossessing a customer’s car is the very last step a finance house wants to take. The bank would far rather have the customer keep the vehicle than to have to take it away due to missed or non-payments.
In an economic downturn such as the one South Africa is currently facing, where household budgets are stretched to the limit, consumers really feel the financial pressure. Unsurprisingly, this type of pressure could lead to some unsound decisions such as missing a monthly repayment on a vehicle or loan agreement. Such a decision could have consequences that may result in the bank potentially repossessing your car.
“We understand the true value of a vehicle and how it can represent so much more than a mode of transport to so many people, it is a means to mobility and as such, having one’s car repossessed is a traumatic experience,” says Lebogang Gaoaketse, Head of Marketing and Communication at WesBank.
Should you find yourself in a financially compromising situation, being honest and engaging in an open dialogue with your financial lender are by far the best policies. Consumers are encouraged to contact the bank as a matter of priority to explore the options available to restructure their payments as a starting point.
“Customers who can’t meet their vehicle repayment obligations due to financial challenges are encouraged to contact the bank as soon as possible to discuss potential alternative paymentarrangements. Defaults on payments will always result in a consultation between the bank and the customer,” Gaoaketse explains.
“This will also negatively impact your credit status. Credit bureaus are notified if you cannot make a payment. If legal action has been taken against you, this will affect your credit score when applying for future credit.”
Here are some useful tips for consumers to avoid having their vehicle repossessed:
Make payments on time
The best way to avoid having your vehicle repossessed is to make all of your payments on time. Set up automatic payments or reminders to ensure that you don’t miss any payments.
Communicate with your lender
If you’re having trouble making payments, it’s important to communicate with your lender. The aim is to find a solution that works for both you and the bank as the primary objective is to ensure that you maintain possession of your vehicle.
Prioritise your payments
If you’re struggling to make payments on all of your bills, it’s important to prioritise your payments. Pay your essential bills first, such as rent, utilities, and car repayments.
Refinance your loan
Refinancing your loan may be another option to investigate, depending on your situation. This could help lower your monthly payments or get a lower interest rate.
Sell or ‘downgrade’ your vehicle
If you’re unable to make payments and have explored all the financial options open to you, you could consider selling or downsizing your vehicle. This will avoid having the vehicle repossessed and enable you to pay off the outstanding loan amount.
“It is important for customers to understand that creditors will only repossess a vehicle as a last resort if no other payment arrangement can be made. We always investigate and discuss all options available to our customers so they can make the repayments. It really is in everyone’s favour, at the end of the day, to keep the car in the customer’s garage, rather than on our auction floor,” concludes Gaoaketse.
An increase in the cost of living at the start of 2022 did not discourage South Africans from buying new vehicles during January.
South Africans were faced with fuel price hikes and another increase in interest rates as the new year started, but that didn’t deter them from buying new vehicles during January.
According to naamsa | the Automotive Business Council, January new vehicle sales increased 19.5% to 41,382 units compared to the start of 2021, creating a solid start to the year and the market’s continued recovery.
“January new vehicle sales kicked off the year at similar levels to the momentum created during the second half of 2021,” says Lebogang Gaoaketse, Head of Marketing and Communications at WesBank, referring to four months of sales in the period exceeding 41,000 units. “While some purchase decisions may have been deferred out of December into the new year, January sales provide a solid start to the year, raising the hopes of manufacturers and dealers for ongoing market improvement.”
While year-on-year comparisons remain difficult to interpret because of differing pandemic circumstances, WesBank remained positive for a continued slow recovery of the market during 2022.
Both passenger cars and light commercial vehicles (LCVs) started the year positively, increasing 26.6% and 3.8% respectively. Dealer sales in the passenger car space out-stripped the overall market, increasing 33.7%, a very positive sign of consumer demand.
Sales into the rental market also indicate an increase in business confidence and a more positive outlook to tourism with sales in the channel up 21% during January.
“While gradual interest rate hikes are inevitable over the course of the year from their record lows, their impact should be considered within purchase decisions and affordability,” says Gaoaketse. “Rising costs of living amidst more slowly recovering earnings are expected to continue placing pressure on household incomes and the wherewithal for consumers to afford new vehicles during 2022. But price inflation in the pre-owned market and necessary replacement cycles some two years after the onset of the pandemic should be expected to fuel demand.”
Effective from 01 August 2021, Toyota customers will have access to FutureDrive – a financial service which will aims to make vehicle ownership more affordable and flexible.
Toyota Financial Services South Africa (TFSSA) is pleased to announce pioneering, affordable and flexible kilometre options on FutureDrive, effective from 01 August 2021.
The key change will offer customers flexible kilometre and term options from 20 000km to 35 000km, more competitive Guaranteed Future Values (GFV) and lower monthly instalments.
Image: Cornel van Heerden
The new offer forms part of an important drive to deliver on a promise to offer reasonable finance options to all customers by offering them affordability beyond product and more control of their finance agreements.
With this lower / more competitive monthly instalments offering we are encouraging customers to take the wheel with FutureDrive
– Thabo Manaka, Chief Executive Officer for TFSSA
FutureDrive allows you to take your vehicle finance into your own hands. From annual mileage limits to the deposit amount, the terms that you decide on all determine the GFV, directly influencing your monthly instalment. FutureDrive is an alternative to traditional finance but with all the traditional features of vehicle finance and with a host of new options and benefits.
Image: Cornel van Heerden
A GFV is the minimum value that TFSSA guarantees your Toyota will be worth at the end of your finance term. The new calculated GFV amounts that are determined by the maximum annual kilometres a customer drives, will offer customers the option to choose lower / more competitive monthly instalments..
Thabo Manaka, Chief Executive Officer for TFSSA says: “This is a full demonstration of our commitment to invest in our customers. We believe in providing innovative mobility solutions that caters for all our customers’ needs. With this lower / more competitive monthly instalments offering we are encouraging customers to take the wheel with FutureDrive.”
In the current economic climate, with increased living costs and the stresses of everyday life in lockdown, many consumers are fearful of being turned down when applying for credit.
Whether it’s a house, credit card or a new vehicle, banks are bound by law, through the National Credit Act (NCA), to ensure that consumers can afford the financial commitments into which they enter. While credit should never be used to live beyond one’s means, it can be a necessity – as in the case with financing a car, which is a major financial commitment.
“While there’s no guarantee that a customer’s application will be approved, there are best practices to follow that can improve one’s credit health and greatly increase the chances of being granted credit,” says Lebogang Gaoaketse, WesBank Head of Marketing and Communication.
1. Establish your affordability
The first step in calculating your budget is finding out how much you can afford to spend on a car. To do this, simply take your income (after taxes and deductions) and subtract all your monthly expenses such as food, rent, airtime, subscriptions, insurance and the like. All these costs need to be deducted from your total income to arrive at your disposable income. This is the money that can be used for luxuries, savings or essential credit, such as monthly car instalments.
Carrying out this budget exercise at home gives you a clear picture of how much you can spend on car instalments.
2. These extras aren’t optional
Remember that affording a car isn’t just about settling the monthly instalment. If you have calculated that you have R5 000 to spend on a vehicle after paying all other monthly expenses, you will need to use that amount to cover the instalment as well as other essentials. Fuel and comprehensive insurance cover are examples of ongoing monthly expenses that need to be budgeted for. If your vehicle doesn’t have a service or maintenance plan, you should also consider putting some money aside each month to cover regular maintenance costs.
These items form part of the overall cost of vehicle ownership and should be included in your budget when submitting your finance application. If your budget allows for these costs, you improve your chances of your application being approved for a car loan.WesBank advises allocating between a half and two thirds of your budget to the vehicle instalment, with the remainder allocated to the additional costs. For example, if you only have R5 000 a month to spend on a car, between R2 500 and R3 000 should be used for the instalment repayment, with the remainder going towards fuel, insurance and maintenance costs.
3. Save up for a deposit
If you’ve demonstrated to the bank that you can budget responsibly, you’ll impress them further if you can put down a deposit payment. While it’s not absolutely necessary to pay a deposit, doing so will work in your favour in the long-term. Paying a deposit reduces the amount of credit required for the transaction, which means lower monthly repayments, less interest and improved affordability. Your ability to afford the monthly repayments is one of the biggest drivers when banks assess your finance application.
Financial responsibility also reflects well on your credit profile, which will also go some way to ensuring your finance application will be approved.
4. Settle as many debts as possible
Your credit profile or credit history shows banks how you use credit. This includes clothing accounts, overdrafts, home loans, personal loans and credit cards. As long as you make your monthly payments on these accounts, your credit profile will be spotless and banks will view you as a reliable borrower.
According to the NCA there are two main types of credit agreements. The first is a credit transaction such as a personal loan, which is taken out and paid off, with interest, over a certain period. With each payment, the outstanding balance reduces over the agreed loan period.
The second type of credit agreement is a credit facility such as an overdraft or a credit card. These are revolving facilities with a maximum amount but also require a monthly repayment of an agreed amount.
When applying for credit, the bank takes all your current and available credit into account. For example, if you have a personal loan that you have been paying off for two years, with a balance of R15 000 and instalments of R1 000, these figures are used in assessing your affordability.
If you have credit facilities such as a credit card with a limit of R50 000 and an overdraft with a limit of R25 000, these amounts are also included in the assessment – whether they are fully used or have a zero balance. These facilities remain in place even after your vehicle finance has been approved and if you do use them then your monthly affordability has to include their repayments. For this reason, the NCA requires the bank to take all credit facilities into account.
The best advice here is to have as little debt as possible, which frees up money in your monthly budget. Once you’ve paid off an account, it is a good idea to close it – or lower the total limit for the facility. The fewer credit facilities you have in your name, the better it looks for your credit profile and your future finance applications.
5. Trading in for the best deal in town
Once you’ve completed the budgeting exercise and calculated what you could afford in a vehicle, you’re ready to visit a reputable, WesBank-approved dealership. One other thing to consider if you own a vehicle is trading in your existing car. If you’ve had your current car for more than four years, chances are that its trade-in value will be more than the money you still owe the bank. This means you’ve passed the breakeven point for your vehicle loan. It also means that the money you make from trading in your car can be used as a deposit towards your new vehicle purchase. The same is true if your car is paid off: the money you receive from that trade-in deal can be put down as a substantial deposit on the cost of your new car.
If your vehicle’s trade-in value is less than the amount you owe the bank, it means you have not yet reached the trade-in value. In this scenario, you will either have to keep your existing vehicle for another couple of months, or you could use some of your savings to assist in settling the existing vehicle loan – though that is not ideal.
Of course, having a trade-in where you don’t have to pay in additional money is going to greatly benefit your car loan application.
“The last thing to keep in mind is to be patient and shop around for the best deal. The new vehicle market is very competitive and, with the current low interest rates, manufacturers have some very attractive offers – some that could help you afford a car and others that offer better value. Find a deal that suits your budget and your needs, and use the advice provided to assist you with your next finance application. If you’ve carefully considered your expenses, calculations and affordability range, your application for finance should be approved,” says Gaoaketse.
In the excitement of buying a new car, some people make the mistake of not fully understanding the best finance options available to them. In the last of our 3-part Vehicle Finance series, we talk about Guaranteed Future Value.
The majority of South African drivers cannot afford to buy their cars outright and rely on vehicle finance from banks. There are a few different vehicle finance options available to customers, namely:
Balloon Payments
Installment Finance
Guaranteed Future Value
But how do you know which one is best for you? To help you make better-informed decisions, here is what you ought to know about Guaranteed Future Value.
GFV finance is similar to a balloon payment, except the residual value held over until the end of the term is guaranteed by the bank
– GHANA MSIBI, CEO OF WESBANK MOTOR DIVISION
Guaranteed future value, better known as GFV, is a form of finance suitable for drivers more focused on vehicle ‘usership’ than ‘ownership’. Simply put, GFV offers customers a clear indication of the future monetary value of their car to make planning ahead easier, but it does come with some mileage and maintenance restrictions, which need to be adhered to. GFV is best suited to customers who stick to a regular driving routine and have a good grip on the distances they drive annually.
At the onset of a GFV deal, the customer and the bank will agree on maximum distances to be travelled with the financed vehicle over the term (usually three to four years), as well as some guidelines about acceptable wear and tear.
At the end of the pre-determined contract term, GFV customers have three choices: they can either enter into another GFV deal and drive away in a new vehicle, settle the outstanding balance to own the vehicle, or simply return the vehicle to a respective dealership and walk away. It’s important to remember, however, that there may be penalties if the vehicle has exceeded the allotted mileage and/or been returned in an unacceptable condition.
“GFV finance is similar to a balloon payment, except the residual value held over until the end of the term is guaranteed by the bank, says Msibi. ” This means less risk and more options for the customer, as the outstanding amount set aside at the start of the agreement can be refinanced, settled with cash or walked away from. But, as with any contract, it is important for the customer to read and understand the fine print before signing on the dotted line.”
* All F&I consultants are regulated by the Financial Advisory and Intermediary Services (FAIS) Act and the National Credit Act (NCA).
In the excitement of buying a new car, some people make the mistake of not fully understanding the best finance options available to them. In the second of our 3-part Vehicle Finance series, we talk about Instalment Finance.
The majority of South African drivers cannot afford to buy their cars outright and rely on vehicle finance from banks. There are a few different vehicle finance options available to customers, namely:
Balloon Payments
Installment Finance
Guaranteed Future Value
But how do you know which one is best for you? To help you make better-informed decisions, here is what you ought to know about Instalment Finance.
Instalment finance agreements come with fewer restrictions such as mileage and the condition of the vehicle, but monthly repayments will naturally be a bit more.
– GHANA MSIBI, CEO OF WESBANK MOTOR DIVISION
Instalment sales are by far the most common and simplest of the vehicle finance options.
Monthly repayments are calculated on the purchase price of a car, and payment terms can be structured into time frames of between one and six years. The longer the term, the lower the monthly instalment will be, but it’s important to remember that interest will increase proportionally to the length of the contract. As such, the total amount repaid to the bank will be more for a longer loan period than a shorter one.
“Instalment finance agreements come with fewer restrictions such as mileage and the condition of the vehicle, but monthly repayments will naturally be a bit more. The extra monthly cost does, however, pay off in the long run because once the payment term is concluded, the customer owns the car outright,” explains Msibi.
One of the most important pieces of advice WesBank has for customers, regardless of which of the three finance options is chosen, is to begin with a healthy deposit. Any money put down upfront will automatically mean lower monthly instalments and less interest, combined with a lower outstanding balance at the end of the contract in the case of balloon payments or GFV deals.
“Any dealership that offers finance through WesBank has a registered Finance and Insurance (F&I*) consultant to guide buyers and explain the different finance options,” concludes Msibi. “These experts can propose which option is most suitable for each respective customer and will offer financially sound advice on what you can and cannot afford,” says Msibi.
* All F&I consultants are regulated by the Financial Advisory and Intermediary Services (FAIS) Act and the National Credit Act (NCA).
In the excitement of buying a new car, some people make the mistake of not fully understanding the best finance options available to them. In the first of our 3-part Vehicle Finance series, we talk about Balloon Payments.
The majority of South African drivers cannot afford to buy their cars outright and rely on vehicle finance from banks. There are a few different vehicle finance options available to customers, namely:
Balloon Payments
Installment Finance
Guaranteed Future Value
But how do you know which one is best for you? To help you make better-informed decisions, here is what you ought to know about Balloon Payments.
For those in the car market, right now is actually a great time to buy thanks to the current low-interest rates combined with some tasty offers from car dealers around the country.
– Ghana Msibi, CEO of WesBank Motor Division
Balloon payments
This is a convenient solution designed to assist the buyer with cash flow at the start of a finance agreement.
A portion of the purchase price is set aside in order to lower monthly repayments, but it’s important to remember this deferred amount will still be owed to the bank at the end of the contract term.
Balloon payments require discipline to be used effectively, and customers opting for this arrangement should make sure they’re saving enough cash every month to settle the debt once the instalment period is complete.
While the benefits that come with keeping monthly costs down may be extremely appetizing, it is important not to view a balloon deal as a way to get into a car you simply cannot afford.
– GHANA MSIBI, CEO OF WESBANK MOTOR DIVISION
Think of a balloon payment as a deposit, but one that’s put down at the end of the contract term instead of at the beginning. Depending on the size of the balloon, the money saved on the monthly payments should more than cover the cost of interest for a loan to refinance the lump sum of debt at the end of the term.
In other words, saving the money yourself while driving the financed vehicle could be cheaper than it would be to apply for another bank loan to pay off the outstanding debt owing on the car.
“While the benefits that come with keeping monthly costs down may be extremely appetizing, it is important not to view a balloon deal as a way to get into a car you simply cannot afford,” says Msibi.
“A looming lump sum after years of driving a vehicle is easy to ignore and forget, but settling that debt is ultimately the responsibility of the buyer. That said, a balloon payment has some great advantages if used properly.
* All F&I consultants are regulated by the Financial Advisory and Intermediary Services (FAIS) Act and the National Credit Act (NCA).
Many drivers don’t seem to realize that tyres are the only point of contact cars have with the road, at any given time. Vuyi Mpofu shares 7-basic tips all motorists should get into the habit of practicing.
Some motorists don’t appreciate how dangerous it is to drive on worn or damaged tyres. Granted, tyre are expensive to replace, but what all road-users should be aware of is that in the event of an accident, your insurance claim could be repudiated if accident investigators discover that the tyres were in poor condition and as a result, were the cause of the collision.
Here are some basic tyre maintenance tips all motorists should get into the habit of following:
Some tips on tyre maintenance:
Check all tyres (including the spare) whenever you refuel your tank.
When parking your car, turn the front tyres so that they are at a slight angle. This will make it easier for you to check the tread of your tyres.
Check the tyre pressure indicator in your owner’s manual or in your car, and inflate your tyres according to the load they will carry. Don’t over, or underinflate, your tyres,
Attend to tyre related problems immediately regardless of how insignificant they might appear to be. Bear in mind that tyres can be quite expensive to replace and as the saying goes – prevention is better than cure.
Replace your tyres as soon as is necessary but NEVER buy your tyres at the side of the road. Buy tyres only from credible tyre outlets.
Ensure that your tyres are Only buy tyres from reputable tyre dealers, not from the side of the road. Remember, a good deal now may cost you more later on,
Ensure your tyres are correctly aligned and balanced, particularly before and after a long-distance trip.
There’s a deep-seated misunderstanding among consumers that a balloon payment makes a car cheaper, or it allows them to drive a vehicle they simply cannot afford.
– Ghana Msibi, CEO of WesBank Motor Division
Factoring a balloon payment into the finance agreement of your next car purchase may come with some appealing benefits, but make sure these benefits are understood clearly and used wisely. Responsible budgeting is key with such payments, so you’ll need to act sensibly during the term period to maximise what they offer.
A balloon payment allows a buyer to take an amount owing on the purchase price of a car and set it aside, meaning the monthly instalment amounts are calculated on a lower value – in turn making repayments more affordable. You’re essentially paying off a loan for most of the car, but not all of it. The amount set aside at the outset remains the buyer’s responsibility and will still need to be settled in the long run.
“There’s a deep-seated misunderstanding among consumers that a balloon payment makes a car cheaper, or it allows them to drive a vehicle they simply cannot afford. However, this is not what a balloon payment is designed for,” says Ghana Msibi, CEO of WesBank Motor Division. “This type of payment is intended to assist with cash flow management at the start of a finance agreement, but only if you can afford it. It may help to ease the burden of monthly expenses, but buyers with balloon deals may need to use cash they’ve been saving to settle the balance owed at the end of term.”
Depending on the percentage of the balloon amount, the money saved on monthly payments should more than cover the costs of interest for a loan in order to refinance the lump sum of debt at the end of a balloon term. In other words, it could be more prudent to save the money yourself while driving the financed vehicle than it would be to apply for another bank loan to settle the outstanding amount owing on the vehicle after years of driving it.
The reason a breakeven point is so important to understand is that South Africans have a tendency to change or upgrade vehicles more often than is financially viable.
– GHANA MSIBI, CEO OF WESBANK MOTOR DIVISION
Vehicle owners entering into a balloon payment deal should familiarise themselves with the term ‘breakeven point’. The breakeven point occurs when the financed car’s trade-in value matches the amount still owed to the bank. When calculating the breakeven point, it’s important to include the amount outstanding in the balloon debt at the end of the loan period.
“The reason a breakeven point is so important to understand is that South Africans have a tendency to change or upgrade vehicles more often than is financially viable,” continues Msibi. “The breakeven point on a vehicle financed with a balloon payment is further down the line than it would be with a conventional instalment deal. If your breakeven point comes at 36 months, but you simply cannot resist a shiny new car after only two years, the amount owed on your first car will be added to the cost of the new deal.
“As such, you’re still paying off a portion of your old car while driving your new one. Consumers who do this multiple times could find themselves in financial trouble if, for example, there is a change to their income and financial situation, resulting in outstanding debt becoming unmanageable. This is a dangerous trap to fall into, and we strongly advise our customers to consider changing cars only once the respective breakeven point has been reached. This will keep monthly repayments, the value of their current car, and the balloon debt evenly balanced.”
We always advise our WesBank customers to look beyond the repayments when gauging what they can afford when buying a car.
– GHANA MSIBI, CEO OF WESBANK MOTOR DIVISION
It is also important not to view a balloon payment as an alternative to an upfront deposit. A healthy deposit on a new or used car will always reap dividends further down the financial road, as it will not only bring your breakeven point forward, but it will also lower the monthly repayment costs and the deferred debt held in the balloon.
“We always advise our WesBank customers to look beyond the repayments when gauging what they can afford when buying a car. With vehicle ownership a monthly instalment is not the bottom line, as other responsibilities including fuel, insurance, tyres, regular upkeep and unrelated living expenses also need to be factored into affordability,” says Msibi. “There’s a big difference between being able to afford a car and being able to afford owning it.”
WesBank offers a range of useful tools and calculators designed to answer your vehicle finance research questions. The newly-launched WesBank App enables you to find out how much you can expect to get for your current car, work out what car you can afford, apply for vehicle finance and get approval in a matter of minutes, or calculate the monthly repayments on your dream car.
Leasing a car is a good alternative to purchasing one but it may not be for everyone
There are many ways through which to finance your new set of wheels but one which is growing in popularity is that of leasing. Here are some basic things you need to know when considering to lease a car.
PROS:
Leasing offers a shorter (generally 36 months) repayment period than the usual 60 – 72 month purchase period
Leasing costs include servicing and ‘normal’ wear and tear to the vehicle
Leasing allows you to drive a new / different car every few years without incurring financial penalties
You’d be driving a car which is covered by the manufacturer’s warranty
Monthly instalments on leased vehicle tend to be lower than purchase price instalments
At end of lease period you won’t have the hassle of selling it because it’s not yours to sell
CONS:
You don’t own the car – essentially you are paying for something you will never own
You are limited to a set number of kilometres annually and risk incurring stiff financial penalties for any distance over the agreed distance
You are likely to be charged extra for ‘above normal’ wear and tear to the vehicle while it is in your possession
As with any contractual purchase, it is important to read and understand the terms and conditions of the agreement before signing on the dotted line; and as with any contract you may be held liable should you not fulfil the terms agreed upon.
Leasing a car is a good alternative to purchasing one but it may not be for everyone nor suite your particular lifestyle and travel needs. Before making the commitment to lease a vehicle, do as much research as possible and weigh the option of leasing against purchasing. Remember that the running costs of a vehicle include weekly fuel costs, insurance, servicing, tyre maintenance, e-tolls and keeping it clean.
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