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Is Refinancing Your Car A Good Idea?

vuyi on April 19, 2023

Refinancing your car is an option that many car owners grapple with.  In an effort to de-mystify what this means, and who should consider it as a viable option, it is important to understand what the term ‘refinancing’ means.

In a nutshell, refinancing a vehicle means replacing your current car loan or finance agreement with a new car loan to revise your debt repayment schedule. In other words, applying for another loan to repay your old debt. As the new loan is usually lower than your existing loan, vehicle refinancing may be a way to save money on your monthly car repayments.

This saving can result from obtaining a loan at a lesser amount, extending the repayment period or negotiating a lower interest rate. Some banks and lending houses also offer the option of refinancing a vehicle that is fully paid up, should it qualify.

It is important to understand what the term means and when or when not to refinance a vehicle.  One school of thought advocates that you should rather consider selling your car before you look at refinancing it.  However, the decision is not always that simple.  “If the new loan is at a lower interest rate, for example, that could save you some money in the long run,” explains Lebogang Gaoaketse, Head of Marketing and Communication at Wesbank.

It is important to carefully consider the pros and cons of refinancing a vehicle, so it is advisable to do some research on the most favourable loan terms and interest rates, before making a final decision.

Advantages:

  • Lower Monthly Repayments:  Refinancing can result in lower monthly repayments, which could assist those who are struggling to cover their monthly costs or who want to free up a bit of extra cash each month.
  • Lower Interest Rates: If you qualify for a lower interest rate by choosing to refinance your car, you will save money by paying less interest over the loan term and by so doing, save on your current monthly instalments.
  • Better Loan Terms: Refinancing allows you to adjust the terms of your loan, such as the length of the loan period or the type of loan, for example, fixed or variable.
  • Improved Cash Flow: Refinancing your vehicle might enable you to access more cash it you owe less than its current value.

Disadvantages:

  • Additional Fees: Refinancing often involves fees such as loan application costs or prepayment penalties which could add up and reduce the potential savings from the refinancing agreement.
  • Longer Loan Term: If you extend the length of your loan through refinancing, you may end up paying more interest over the term of the loan, even if you have a lower interest rate in place.
  • Negative Equity: If you owe more on your vehicle than it is worth, refinancing may not be an option or may not result in any significant savings.
  • Credit Score Impact: Applying for a new loan can temporarily lower your credit score if you are approved for a loan with a higher interest rate, it could negatively impact your credit score in the long run.

There isn’t a one-size-fits-all solution to structuring a car refinance deal. By being honest with yourself and knowing how much you can afford on the vehicle repayment, you would be better informed about your options.

New Interest Rate Hike Increases Pressure on Financed Vehicle Owners

vuyi on April 4, 2023

Press Release: Wesbank

The recently increased repo rate, coupled with rising inflation, a deteriorating Rand, slow economy, unemployment and other global factors are creating tough living conditions for many South Africans.

The South African Reserve Bank (SARB) has recently announced a further hike in the repo rate of 50 basis points. This is the second rise in interest rates this year, following a 25 basis points increase by the SARB’s Monetary Policy Committee at the end of January. With the repo rate now standing at 7.75% from 7.25%, the current prime lending rate shifts from 10.75% to 11.25%, its highest level since 2009.

This increase directly impacts people who are paying off loans such as vehicle finance or a home loan coupled to the interest rate, as the monthly repayment will increase. In a weak economy with slower inflation, the high cost of living and increasing food prices, many South Africans are struggling to stretch their already-strained budgets to reach month end. The new repo rate announcement puts added pressure on consumers.

“An interest rate hike has a ripple effect across all sectors of the economy. Our customers are not unaffected by this higher cost of borrowing either,” comments Lebogang Gaoaketse, Head of Marketing and Communication at WesBank. “Those customers whose vehicles are financed through WesBank with a fixed interest rate, are not affected by the rate hike. However, those customers who opted for a linked rate will see their monthly car repayment increasing.”

What is a fixed interest rate versus a linked interest rate?

The interest rate affects the amount a bank or finance house such as WesBank charges you for borrowing money. The amount you need to pay back is determined by the interest rate on your finance agreement and, despite the latest increase, is still relatively low for anyone repaying a vehicle finance loan. When buying a vehicle, new or used, customers have the option to choose between a fixed or linked (variable) interest rate for their vehicle finance agreement.

As it stands, a fixed interest rate will not change for the duration of your payment period. This can work in your favour, especially if the interest rate is as volatile as is currently the case in South Africa, and you want the security of a constant fixed monthly repayment. If the rate drops. you will continue to be charged the agreed higher fixed interest rate.

A linked interest rate is linked to the prime lending rate and fluctuates with the SARB’s repo interest rate. If the rate increases, as it has recently, so will your repayment amount. However, if it is lowered, you will benefit from a lower monthly repayment and have some extra money in your account. Linked interest rates are usually slightly lower than fixed.

“It is also important to remember that vehicle ownership is more than the initial price tag. You also need to take into account the monthly repayments plus the added costs of fuel, comprehensive insurance cover, as well as general maintenance and service expenses. And, of course. the interest rate hikes that continue to directly impact consumers’ monthly budgets,” comments Gaoaketse.

There isn’t a one-size-fits-all solution to structuring a car finance deal. Knowing how much you can realistically afford on the vehicle repayment, including interest rates and other increases, will stand you in good stead. But, it’s not only about cars. The increased interest rate also impacts credit cards, home loans and clothing accounts among others. Consumers with additional debt will notice the increased repayments starting to affect their budgets, as household debt levels in South Africa remain at high levels.

Rising interest rates and inflation, brought on by a deteriorating Rand, a tough economy and other global factors, could see buyers postponing new vehicle purchases, buying down or even exiting the new car market altogether in favour of better value in the used car market.

Avoid Your Car Getting Repossessed With These Simple Tips

vuyi on March 28, 2023

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 payment arrangements. 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:

  1. 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.

The Truth About Vehicle Finance Balloon Payments

vuyi on February 14, 2023

When it comes to vehicle finance, balloon payment deals are possibly the most commonly misunderstood of all installment-type payment options.

In this article, Lebogang Gaoaketse, WesBank’s Head of Marketing and Communication sheds light on the subject of balloon payment deals and shares advice for consumers considering this type of repayment option for their next car purchase.

Lebogang Gaoaketse, Head of Marketing and Communication at WesBank
Q : What is a balloon payment deal?

Lebogang Gaoaketse : When taken at face value, balloon payment deals may seem like an easy way to drive a car you simply cannot afford. You’re basically taking an amount owed on the purchase price of a car and setting it aside, in turn making monthly instalments lower because they are calculated on a smaller initial debt owed to the bank. It’s important to remember, however, that the amount set aside at the start of the deal is still the buyer’s responsibility and will need to be settled.

Q : What are the benefits associated with balloon payments?

Lebogang Gaoaketse : Balloons are designed to help ease the burden of monthly expenses, but the luxury of lower repayments every month does come with a great deal of responsibility for the buyer. When used correctly, the money saved on repayments should more than cover the costs of a loan needed to refinance the lump sum of debt at the end of a balloon term. Put simply, customers should aim to reserve the money they save every month in order to make settling the outstanding amount owed on a vehicle easier after years of driving it.

Q : Saving money isn’t easy even at the best of times but why is there an emphasis on savings when it comes to balloon payment deals?

Lebogang Gaoaketse : Extremely responsible budgeting is key to maximising the benefits of a balloon deal, so if you know you might struggle with saving money every month, then this option is probably not the best one for you.

There is a big difference between being able to afford driving a car and being able to afford owning it.  We advise customers to consider much more than only monthly repayments when calculating vehicle finance affordability. While installment amounts may seem like the bottom line, other responsibilities such as fuel, insurance, tyres, regular upkeep, unrelated living expenses and, in the case of balloon payments, that all important lump sum owed also needs to be taken into account when looking at affordability.

Q : We often hear the term ‘breakeven point’. Tell us what it is and how it becomes a factor when financing a vehicle.

Lebogang Gaoaketse : Breakeven points are critically important to understand.  A breakeven point occurs when a financed vehicle’s trade-in value falls in line with the amount still owed to the bank. Depending on the finance deal structure, a breakeven point may come sooner or later during your term, with sooner always being the goal. By nature, balloon payments will push your breakeven point to a later date within a loan period.

South African drivers have an unhealthy tendency to upgrade their vehicles and enter new finance deals more often than is financially viable. Rolling outstanding debt into a new purchase, or in other words, paying off a portion of your old car while driving your new one is a dangerous trap to fall into. Irresponsible buyers who do this multiple times not only push their breakeven point very far out of reach, but in extreme cases can owe the bank an amount that is more than what their asset, or car, will ever be worth. 

It’s also important to not see a balloon payment as an alternative to a deposit put down at the start of a loan. A healthy deposit on a new or used car will always make your financial road an easier one to travel, as repayment costs and the deferred balloon debt will be lower.

WesBank strongly advises keeping monthly repayments, the value of a current car, and balloon debts evenly balanced.

Chris de Kock retires as CEO of Wesbank

vuyi on March 30, 2022

By H&H Admin

After nearly 35 years in the business, Chris de Kock is retiring as CEO of WesBank and handing over to Ghana Msibi.

WesBank today announced that after nearly 35 years in the business, Chris de Kock is retiring as CEO of WesBank and handing over to Ghana Msibi who is the current CEO of WesBank’s motor retail division.

Chris joined WesBank in 1987 and has held the role as CEO since September 2013.

Chris de Kok

Commenting, Chris said that it was time to hand over the reins to the next generation of leadership.

“I am very proud of the business we have collectively built over the years. WesBank is a market leader in vehicle and asset finance with an unparalleled portfolio of partnerships. Our unique model has allowed us to deliver a long track record of growth and returns to the shareholders of WesBank’s parent FirstRand Limited. I am pleased that Ghana has agreed to take on this role and I have every confidence that he will make it a great success.” 

Ghana Msibi

Ghana who has been with WesBank for the last 7 years, said he was excited to step up and lead WesBank.

“It’s a very special business, with passionate people and high quality, long-standing partnerships. It’s a privilege to take over from Chris,” says Ghana Msibi.

Chris will retire as WesBank CEO effective 30th June 2022 but will remain with the FirstRand group for the next twelve months to ensure a seamless handover and finalise a number of strategic projects currently underway.

February 2022 sales best in almost a year

vuyi on March 3, 2022

By H&H Admin

The new vehicle market continued to surge ahead during February, recording its best sales month since March last year.

According to naamsa | the Automotive Business Council, February new vehicle sales grew 18.4% compared to February 2021 to 44,229 units, a performance approaching volumes realised during the second half of 2019. 

“Despite the traditionally short February selling month and in the face of interest rate hikes and fuel price increases, new vehicle sales performed reassuringly well during the month,” says Lebogang Gaoaketse, Head of Marketing and Communication at WesBank. “Consumer demand was strong during February, particularly for new vehicles as opposed to used, borne out by WesBank’s 14.2% increase in finance applications for new vehicles alone.”

That activity was particularly strong on the passenger car dealer floor, sales through that channel growing 27.9% during February, well ahead of market growth. Overall passenger car sales grew 22.4% to 29,563 units with a slightly flatter performance from the rental market this month.

Light Commercial Vehicles were up 9.4% to 12,290 units compared to February last year.

“Although year-on-year growth during February looked inspiring, passenger car sales were actually marginally (463 units) down on January sales,” says Gaoaketse. “Light Commercial Vehicle sales during February, however, were 2,666 units or 27.7% ahead of January, likely as a result of erratic supply continuing to hamper the market.”

The market has further headwinds to face as fuel prices will exceed R21 per litre inland during March and are destined to rise further amidst tensions in Ukraine. Industry could also face additional complications over and above microchips as supply and manufacture is potentially disrupted in the region and Russia. 

“The situation could amplify the divide between consumer and business demand and the market’s already hampered ability to supply,” says Gaoaketse. 

“This increasing amount of pent-up demand may only be balanced by affordability considerations thanks to increased running costs, and household incomes, which remain under pressure.”

It’s a far better situation to be in than weak economic activity and the market is rejoicing thanks to increased activity in sales with the consequent ripple effect throughout the value chain. 

The new vehicle market is already 18.8% up to 85,559 units during the first two months of the year compared to the year-to-date performance of 2021, outrunning many forecasts already made for the market this year.

“This bodes well for the continued recovery of the new vehicle market,” concludes Gaoaketse.

Good start to the new year with impressive January car sales figures

vuyi on February 2, 2022

By H&H Admin

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.”

Involved in a car accident? Here’s what to do…

vuyi on December 16, 2021

With international travel restricted for South Africans due to the latest COVID-19 variant, there will be an increased number of vehicles on our roads which could lead to a higher than usual rate accidents.

SA Vehicle Sales Figures End 2021 On A Relatively High Note

vuyi on December 2, 2021

Press Release: Wesbank

South Africa’s new vehicle market has been faced with numerous challenges over the course of this year but sale seem to be on the rise.

South Africa’s new vehicle market has faced many challenges over the course of 2021.  However, the first interest rate hike in three years, consecutive fuel price hikes, a new variation on the pandemic theme and the return of load shedding didn’t deter sales too much.

The market’s resilience continued, recording 41,588 sales during November according to naamsa | the Automotive Business Council. This represents a 6.6% growth over the same period last year and a marginal improvement (553 units) over October.

“While it remains difficult to compare data over periods given the uncertainty of the pandemic for the past two years, a more certain sign of market improvement can be seen in a broader view of sales performance,” says Lebogang Gaoaketse, Head of Marketing and Communication at WesBank. “During 2020, just two months of the year exceeded 40,000 units and those were the first two months, prior to lockdown regulations being put in place; five months of 2021 have recorded sales of more than 40,000 units, including the past four months consecutively. Market conditions are certainly improving.”

Year-to-date, the market has recorded 428,131 sales, up 24.8% on 2020’s 342,956.

The Passenger Car market increased 9.4% to 27,828 units. Dealer sales in the segment grew similarly by 9%, injecting much-needed confidence into the retail network’s sustainability as well as an indication of consumer confidence.

The Light Commercial Vehicle segment declined marginally (-0.8%) to 11,156 units with dealer channel sales slightly higher (0.2%) than November last year. 

The rental market once again provided a robust 4,771 sales across both segments, the current travel bans are likely to have an impact on this sector going into the new year.

“While the market is experiencing certain signs of continued recovery, the realities of rising interest rates and fuel prices is expected to impact affordability as household budgets still play catch-up from the ravages of the pandemic,” says Gaoaketse. “These factors are economically inevitable, but will certainly apply pressure to consumers.

Chery South Africa set to open 30 new dealerships

vuyi on November 19, 2021

Press Release: Chery South Africa

Chery South Africa has appointed 30 new vehicle dealers across the country, covering every province and metro.

The new Chery dealers will offer a full range of sales and support services, including vehicle finance from Chery Financial Services (a new finance alliance with WesBank) and roadside assistance, following a recently concluded agreement with the Automobile Association.

The network will stretch as far north as Louis Trichardt and cover towns and cities like Bloemfontein, Welkom, Klerksdorp, Middelburg, East London and Gqeberha from the onset.

Major cities like Pretoria, Johannesburg, Durban and Cape Town will have several new Chery dealers at launch and other growing towns and cities like Polokwane and Mbombela will follow soon after the initial launch.

“We were heartened by the number of dealer applications we received from across the dealer group spectrum and from automotive entrepreneurs.

Our priority was selecting dealers with the necessary infrastructure and capacity to rightfully sell and service Chery vehicles from day one,” says Tony Liu, Executive Deputy General Manager of Chery South Africa.

“While we are starting with 30 operational Chery dealers, we will expand quickly to make sure that no South African motorist is far away from a local and trusted Chery dealer. We believe that Chery adds an exciting new dimension to our range of affordable and luxury brands.  

We are investing heavily in the training and support of our new dealer network to make sure that our dealer principals, their sales and service staff and their premises represent the modern Chery brand and our ‘Fun to Drive’ ethos”, Liu concluded.