If you fall into arrears on your vehicle loan, the bank that provided the loan may repossess your car. However, the bank is required to follow a standard procedure in these circumstances, and you need to know your rights as a consumer.
Defaults (missed repayments) on vehicle finance, after trending downwards since mid-2023, took an uptick in the second quarter. South Africans who defaulted for the first time on their car loans increased between March 31 and June 30, according to the Experian Consumer Default Index for the second quarter of 2024, released this week. The total outstanding amounts on car loans rose from R505 billion in the first quarter to R508bn in the second quarter, and the outstanding balances of first-time defaulters rose from R4.8bn to R5.8bn, an increase of about 21%.
Howard Gabriels, the lead ombud for the Credit Division at the newly established National Financial Ombud Scheme (NFO), said that in difficult economic conditions, consumers should prioritise essentials such as education, health care and savings, over nice-to-haves such as a new car.
We urge consumers to consider the long-term consequences should they not be able to service their debt repayments, and reassess their budgets, with better financial planning practices, rather than facing a possible repossession scenario down the line, Gabriels said.
In a press release last year on repossessions, the then-ombudsman for banking services, Reana Steyn (now the head ombud for the NFO), said it was important to be aware that, under vehicle financing agreements, the vehicle remained the property of the bank until the loan was fully repaid. She said a default would have the following consequences:
