According to Experian’s Q1 Consumer Default Index or CDI for 2021, 23.7 million consumers - with credit cards, personal loans, car loans, home loans and retail loans - have a total of R1.9 trillion in outstanding debt. The index shows that while home loans and retail loans have shown an improvement, car loans have deteriorated by a substantial margin, from 3.67% in March 2020 to 4.10% in March 2021.
“Reports by TransUnion and National Debt Advisors have echoed these findings and despite the lockdown relief measures put in place by banks to assist cash-strapped borrowers, car repossessions are rising,” notes Marc Friedman, CEO of Weelee.co.za.
“Covid-19’s third wave is putting South Africans under even more pressure. To avoid a repossession, cash-strapped vehicle owners need to react promptly and be wise in weighing up the various options available to them.”
Friedman suggests South Africans to not wait until it’s a crisis: “If you think that you might struggle with fulfilling your car instalment obligations, be proactive and start making a plan now.”
Here are a few tips for car owners to survive these turbulent times:
- All cards on the table: Compile a detailed budget with an accurate reflection of your income and expenses. Be realistic about whether you can afford your car’s repayments, running costs, maintenance costs and insurance.
- As lean as possible: In addition to trimming items on your household budget, try to make your current car more affordable. Examples include shopping around for a good RMI accredited provider to service your car professionally, but more affordably, with OEM parts; buying more affordable, but still good quality tyres; and making sure you use all benefits offered by your maintenance plan and other value-added services.
- Consider all plans: If you are in good standing with your financial services provider (FSP), try to negotiate different terms, such as extending your loan duration to reduce repayments. This may incur more interest, but you’ll be able to keep your car. If you’ve been retrenched, consider using your credit insurance or income protection plan, if you have one, to carry you through times of crisis.
- Sell it now, buy something better later: Sell your car and scale down to alleviate the financial pressure, saving any surplus for a future deposit or using it to settle other debts.
- Don’t accept the first offer: Be savvy when selling your prized possession. Research the going rate for your car properly. Don’t simply settle for the first offer and make sure you get maximum cash for your wheels.
- Consolidate multi-car households: Consider letting go of one or multiple cars to either scale down on the amount of vehicles, or to buy something more suited to your financial and lifestyle needs.
- Be vigilant: There are many criminals, who often pose as buyers, ready to pounce on unsuspecting sellers. Only use screened, trusted dealers and properly secured platforms.
“Our cars are often more than just a mode of transport – they’re an extension of who we are, yet their cost can add significantly to our woes in times of financial difficulty,” Friedman concludes. “Through careful planning, clever adjustments and smart selling, we can use them to weather this storm with change to spare.”
PERSONAL FINANCE