For many of us, the euphoria of buying our own vehicle is similar to the beginning of a relationship. It is full of exciting firsts and milestones. We know that we will be together for quite some time to come – that is, at least as long as it takes to pay the vehicle off, but hopefully even longer.
The truth is the rising cost of living exacerbated by petrol price hikes, the VAT increase and other often unforeseen expenses, sees many of us finding our wallets and bank accounts stretched beyond the limit. Often these changing circumstances influenced by economic and political factors forces consumers to reconsider their spending choices. Often, however, these choices lead to consumers electing to miss or even not pay their monthly vehicle installments.
“It is vital for you to be aware that not paying your installments is a breach of contract and may eventually lead to the repossession of your vehicle – so it is important to make sure that you find a way to avoid this before it happens,” says Charl Potgieter, Head of Personal Markets at Absa. “Consumers are faced with increasing costs impacting their net disposable income and did not account for fuel, maintenance and even interest rate increases. This means that what was initially affordable for the consumer, has now become unaffordable.”
Potgieter advises consumers to consider the full cost of vehicle ownership and always build in a buffer to cater for rate, fuel and maintenance fluctuations. Consumers purchasing used or second-hand vehicles (often out of motor plans), must consider the benefit of obtaining extended motor plans.
Here are some of Potgieter’s top tips on the options you can consider if you find you can no longer afford your monthly vehicle installment:
Speak to a financial advisor at the bank where your car is financed.
This should be your first action because banks have experts on hand to best advise you on exactly what options are open to you and will depend on the vehicle finance plan and additional products and services you have selected.
Depending on your circumstances, there may be value-added-products that provide relief
Most banks offer additional products and services such as credit protection that help protect your vehicle finance agreement and minimise potential risks you face. If you have a value-added product or service in place, your advisor will be able to help you understand what it covers and what Options are available to you.
Cutting out non-essential monthly expenses could allow you to cover your installment
Seeing your budget in black and white will help you visualise exactly what is coming in and going out of your account and you will be able to determine where you can make changes or cut out unnecessary costs and redirect them to where they can be put to better use. If looking at figures leaves your head swimming, make that call and visit the bank’s financial advisors. You may well be able to make the necessary lifestyle changes that will help you keep your car.
Trade in for a more affordable vehicle or sell your vehicle altogether
You can go to a reputable dealer to establish the trade-in value or negotiate the sale of your vehicle. This will help you determine what other vehicle is a more realistic option in your price range or else provide a much-needed cash injection to ease financial pressure.
Alternatively, you can also look at the option of selling your vehicle through your bank. Absa has a private-to-private network where the bank facilitates the deal through its own bank-approved partners and can arrange finance for the buyer if they need it.
Refinance your vehicle
If the settlement value of your vehicle is higher than the trade-in or market value then, your next step is generally to consider extending the payment period of your loan. You can talk to your bank about restructuring your loan to make your monthly obligations more manageable.
None of us ever want to find ourselves in a tight financial situation where we can’t pay our monthly vehicle installments – but sometimes this happens and it is important to remember not to panic and to reach out for help. “It isn’t often that there isn’t a solution – especially if you collaborate with the people that deal with these matters on a daily basis. Industry leaders like your bank will work with you to come to an arrangement that will help you survive tough times,” concludes Potgieter.