Car repossessions are rising after lockdown. Here’s how to stop you car being repossessed.
- Car repossessions are up to pre-lockdown levels, and likely to rise.
- There are ways to avoid having your car repossessed, starting with talking to your bank, early.
- Some lenders will help you sell a car you can't afford anymore, and you may be able to save on costs by giving back the car rather than having it taken away.
- For more stories go to www.BusinessInsider.co.za.
During April and May, car repossessions dropped to nearly zero, as a hard lockdown shut car dealership and licensing offices.
Now the rate of repossessions of cars by South Africa's major banks is generally back to where it was before lockdown started in March – and it is likely to climb. Industry experts say the end of relief measures from banks for struggling consumers, and a recession expected to bite, will see new highs in repossessions.
Absa, Standard Bank, and Nedbank all report that car loan arrears and impairments are rising.
For the half-year ended in June, Absa reported that its vehicle and asset finance unit experienced impairments of R2.129 billion, up from R548 million in the first half of 2019.
Absa’s credit loss ratio increased to 5% by the end of June from 1.4% at the end of June 2019. The bank provides finance to over 400,000 customers that have taken out R87.6 billion in car loans.
Standard Bank’s car repossession rate increased from 0.25% to 0.32% of the value of the bank’s total car loan book, spokesperson Ross Linstrom says.
Nedbank, which provides R106 billion in finance for about 670,000 cars was repossessing 1,200 cars per month before the national lockdown started, and the level of repossessions was back there in July and August.
The portion of Nedbank car finance borrowers in arrears had risen to 7.6% by the end of June from 5.5% at the end of December last year, says Trevor Browse, managing executive of Nedbank’s Motor Finance Corporation
Wesbank too is seeing repossessions at levels similar to before the lockdown, says Lebogang Gaoaketse, Wesbank head of marketing and communication.
How to avoid having your car repossessed
DebtBusters says car repossessions are avoidable if a consumer in trouble with repayments negotiates different terms, sells their car, or files for bankruptcy.
“If your credit history is in relatively good and you haven’t yet missed a car loan payment, but you are worried about keeping up with those payments, approach your lender about extending the duration of your loan to lower your monthly payments,” DebtBusters adds.
“If the lender agrees, you will pay more in interest over the life of the loan, but that trade-off may help you keep your vehicle."
You can give back your car to the lender if you and your lender can’t come to an agreement, and when selling it is not a viable option.
“Doing so is called voluntary repossession. The major benefit is that you don’t have to reimburse the lender for the costs of repossessing the car. However, you may still have to pay the lender the costs of storing and selling it,” DebtBusters says.
It is best to talk to the bank when you know you are in trouble, and even before you know you may miss a payment, says Nedbank’s Browse.
“We have several measures we can work with you to avoid repossessing your car,” he adds.
Nedbank’s Motor Finance Corporation suggests that if you run into trouble with your car payments, you can also apply to the bank to restructure your car loan, or seek help from the bank to sell your car.
WesBank’s Gaoaketse says that car loan customers should keep a close eye on their finances and budget appropriately.
“WesBank customers who cannot meet their vehicle payment obligations because of financial challenges are encouraged to contact us as soon as possible to discuss potential alternative payment arrangements. Defaults on payments will always result in consultation between the bank and the customer,” Gaoaketse says.
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