Vehicle Finance in South Africa ?
Automobiles play a vital role in our daily lives, and these machines help us with an efficient mode of transport for humans, goods, and services.
To acquire and repair motor vehicles it has consequently been on the increase. Our lives become stagnant and unbearable without the use of cars, and this is why all human beings at some point in their lifetime desire to own one. In some circumstances, vehicles are acquired as a sign of life achievements. Some individuals live intentionally to purchase their dream car.
However, the idea of buying a car can be impeded by some elements that are beyond one’s control. When the cost of a motor-vehicle becomes too high, the majority find it difficult to obtain one, a situation which the majority of South Africans are facing in the modern day.
The vast numbers of South Africans see it challenging to obtain a vehicle and subsequently, own it. Whether new or pre-used, the cost of motor vehicles remains far out of reach to the ordinary citizen. The failure of citizens to obtain the primary assets would make their lives a crisis, and the need for effective vehicle financing options is continually rising.
Vehicle finance is what the majority of South Africans need to finance the acquisition and purchase of motor vehicles.
What does vehicle finance deal with ?
Vehicle finance is the section of personal finance that deals with the provision of funding needed by individuals to acquire cars and other related automobiles. The concept of vehicle finance was popularized by vehicle dealers who would join hands with banking institutions to provide credit facilities for vehicle customers. With this, the idea of vehicle finance has broadened up and now comes with many options.
Prospective vehicle finance clients can now access funding in the form of loans, leases, and in addition to credit facilities under hire purchases. The vehicle finance options now issue a variety of payment modules. You can choose to pay a deposit, use a balloon payment, or opt for installments that do not have variations in cash. All these are solutions that allow clients to quickly drive cars, simultaneously making payments that will lead to ownership.
The hire purchase is by far the most common form of vehicle finance. This option involves the consequent payment and use of a car, with the transfer of ownership at the end of the agreed payment terms. The hire purchase is a less risky plan for car owners and manufacturers since there is no immediate change of ownership. To the client, the hire purchase also presents advantages that the car will have comprehensive insurance cover, with some having alternatives for exchanging for better cars after the repayment.
Vehicle loans are also available as personal loans, and these are loans issued in the same nature with pay-day loans, quick loans, and short-term loans. The vehicle loans are financial extensions that come in large amounts.
Vehicle finance also comes in the form of vehicle refinance, which is usually issued to clients who experience complications in making payments.
Who issues vehicle finance?
There are vast numbers of credit facility providers that are keen to finance your way of purchasing a car. These are companies and organizations that have identified and recognized the need for the people of South Africa to travel safely.
On the other hand, the National Credit Regulator (NCR) plays an essential role in detecting who issues credit facilities for vehicles. The regulator, registers and issue licenses to all credit service providers in addition to performing revisions on all license holders. Large amounts involved in the vehicle finance sections, there has been a capital deterrence on the companies in the area.
Vehicle finance is issued by companies, organizations, and banking institutions that work in partnership with vehicle manufacturers and dealers. The banking institutions continually provide the cheapest vehicle finance solutions in addition to favorable covenants in comparison to other financial institutions. Banks like Absa, Nedbank, and Standard Bank have numerous engagements with vehicle manufacturers and dealers. This has resulted in a large number of quality cars being issued to South Africans on credit.
In addition to the banking institutions, there is a long list of companies that specialize in the provision of vehicle finance, and these companies include Investec, Wesbank, and Easy Car finance. There is also a car dealership that doubles its services with vehicle finance. It’s specifically for vehicles that are produced or sold under their roofs, and these include BMW Financial services and The Cape Auto Centre.
Why vehicle finance?
We might want to achieve some things in our life, but the need to does not always correlate with our financial muscle. Majority of South Africans should opt for vehicle finance rather than saving funds to purchase a car is triggered by the immediate need for a car. Our nation is amongst countries that have an unreliable form of public transport when compared with other African countries.
In addition to this, public transport modes in the country have been known as criminal hubs, and people can not feel safe in these forms of transport. With that in mind, one can not wait longer to obtain a vehicle of their choice.
More-so, to those who wish to obtain vehicles of their dreams, the vehicle finance root presents a faster way of driving the wheels of your choice. There is a large number of people who go to work with a continuous admiration of some vehicle models. They might be able to save funds for a year or two and buy these cars, and the problem is that vehicles are affected by technological advancement.
These are some of the reasons why our people always choose to buy cars the easy way with vehicle finance.
Can pre-owned vehicles be financed?
Vehicle finance is issued on both new and pre-owned cars. It all depends on the company or finance institution that is facilitating the purchase of the asset — a various number of vehicle finance providers that also specifically issue funding. For the purchase of pre-owned cars, usually, these could be companies that are actively involved in the trading and maintaining of used vehicles.
The purpose of vehicle finance is to facilitate the acquisition of cars , whether the vehicles are old or new. The primary issue is placed on the mechanical condition, year of manufacturing, and the state of the vehicle. Usually, vehicle finance for pre-owned cars is issued where the car has been manufactured within ten years from the date of application.
Pre-owned cars are also explicitly covered by the form of vehicle finance known as refinancing. Vehicle refinances mostly issued on clients that choose to purchase their vehicles with a finance option that has a balloon payment.
The balloon payment, which is sometimes too large for the people to pay, usually will pose a significant challenge to the credit score of the applicant when it fails to be paid. The refinancing scheme allows vehicle finance clients to rejuvenate their repayments, clearing the initial debt with a smaller loan that have significantly small installments. The low payments will be manageable, thus relieving pressure on the monthly budget of the applicants.
Can vehicle under a finance scheme be sold?
Similar to the terms of property finance, vehicles under a finance scheme are used as collateral security on a loan or credit facility that the applicant would have obtained.
The car which still has a balance, one which is being repaid for cannot be traded. In scenarios where the clients have severe reasons for selling the vehicle, they should make engagements with the finance company. In most situations, the company will help the applicant to dispose of the car at the market value of the installments which have been made; this option comes at an additional cost.
If the applicant is financially stable, the easiest way is to make a bulk payment is to sell the car at its market value. Also, try to recoup the funds which were used for bulk payment from the disposal of the vehicle. In this way, one will not attract penalties, and the credit scores will be significantly improved.
What happens when your principle borrower dies?
Death is the unfortunate event that will happen to us all eventually; the time is not known and can not be detected by anyone. Given the length of vehicle finance terms, a lot of things happen within the duration of repayment, some of which might result in the death of the principal owner of the vehicle.
Similar to property finance, vehicle finance is obliged to come with insurance packages that cover the applicant in times of death and permanent disability. In such a scenario, the death or permanent disability of the principal vehicle owner can result in the repossession of the car. If the applicant dies, the vehicle will be passed to the beneficiaries with no financial obligations, and in fact, the insurance company will complete the repayment.
In the event of permanent disability, the insurance company will complete repayment, and the car remains in the hands of the owner.
What is the cost of vehicle finance?
Once you been provided with a loan or a credit facility for a car, there is a likelihood that they will be initiation fees and service fees. Most vehicle finance options come with insurance and car service fees. They are charged and payable as part of the vehicle installment, these all form part of the vehicle finance costs.
Cars in South Africa have a high risk of being hijacked. Most vehicle finance schemes will make it mandatory for their clients to have insurance cover. The comprehensive insurance cover will form part of the repayment, and it aids in the recovery of the car when unforeseen adverse events happen. The interest costs come in monthly or yearly pegged interest rates. Interest rates are closely watched by the NCR, as the authorities try to curb the overcharging of credit facilities consumers.
The interest rates are pegged at a maximum of 5% per month, a price that can not be surpassed by any credit provider in South Africa.
How do i apply for vehicle finance?
For one to apply for vehicle finance, some regulatory and corporate requirements should be met. The provisions made by the credit regulatory authorities and companies have put into ensuring that responsible credit services are given. Also, at the same time facilitating the process of credit assessment as a mitigating risk factor.
Generally, the applicants of vehicle finance are required to be South African residents who are employed on a job where they earn a regular income. The applicants should be receiving their salaries through the banking system.
When prospective applicants meet the above conditions, they can move on to make online or paper-based applications. The application process requires applicants to fill in their personal and financial information before submitting documents needed to authenticate their statuses.
The following documents should be submitted during the application process
- Identity document
- Proof of residential address
- Valid South African driver’s licence
- Three months stamped bank statement
- Latest pay slip from the current employer
Lenders offering Vehicle Finance in South Africa
Informative books on Vehicle Finance in South Africa
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