We entered Level 4 of the lockdown on Friday, 1 May 2020.
Though some restrictions have been lifted and some people from certain industries are back at work, for many the struggle continues.
Jobs have been lost and salaries have been negatively affected.
If your financial circumstances have changed and you have a monthly vehicle repayment to make, you need to know what your options are with your vehicle finance during lockdown.
According to all banks and financiers of vehicle loans, repossession is the last resort for them.
This is because repossession of a vehicle ends in a no-win scenario for both the banks and the consumer.
Like with every other aspect of your finances right now, the best thing to do is to communicate with your creditors if you are having problems honouring your monthly instalments.
There are options available even if you are already in default.
It is general industry practice for legal action to be taken after a client misses three payments.
If this legal action ultimately leads to repossession of your vehicle, it will in all probability be sold at auction for a fraction of the price - to try and make up the bank’s loss - and most importantly, you will still be liable for any shortfall.
Please note that this is also the case after you have missed payments and you voluntarily surrender your vehicle to the bank.
You will no longer have your vehicle, but you will still be liable to pay whatever is owed on it.
So it is by far better to do whatever you can to salvage the situation before it gets to this point.
Some of the options available if you have skipped payments is to pay back the arrears in either a lump sum, over three months or at the end of the term.
The options available vary from individual to individual, but the longer you take to pay back your arrears, the more interest will be added and the more costly your overall debt will become.
Depending on your standing with your bank, some financial institutions have payment arrangements in place that extend to longer than six months.
In line with payment relief plans offered during Covid-19, banks have also put in place payment holidays or breaks for their clients who are in good standing.
I would also encourage you to have a look at the credit insurance cover you may have on your vehicle finance.
Policies and terms and conditions differ, but if you are paid up with your insurance premiums there is a good chance that your vehicle instalments could be covered for a few months.
But you won’t know until you make the effort to get clarity on it.
Some consumers who have taken stock of their financial situation over the last few weeks (even those who are up to date with instalments) are also choosing to give up their vehicle because they realise they will no longer be able to afford it in the foreseeable future.
Some banks are also willing to explore the option of an assisted sale.
In this case, the bank will assist the client in selling the vehicle through a reputable dealership, to try and get more cash for it than on auction.
The higher the price the car is sold for, the less the shortfall is for the consumer to cover.
The most important thing to do is to communicate with your bank before you even miss a payment.
Sticking your head in the sand and being in denial serves you no purpose whatsoever.
In fact, it only makes the situation worse.
Jana Coetzer, the business support manager for MFC, the vehicle financing division of Nedbank, says they encourage their clients to be proactive.
During this process they may encourage clients to consider applying for debt counselling as prescribed by the National Credit Act, if this will help them to pay off their car or cover their shortfall.
Now is the time to seriously take stock of your finances, people.
Acknowledge the reality of your current situation and also be honest with yourself about your prospects for the future.
As the saying goes, we can’t live on love and fresh air.
Proactive financial steps to take during lockdown:
- Draw up a budget. I suggest you do this “old school style” with a pen and paper, and not on a computer. We connect better when we write things down.
- Clearly distinguish between your wants and needs.
- Make choices that work best for your current situation. If you are no longer working and therefore no longer need your car to travel to and from work, look at the options of perhaps getting out of a long-term vehicle repayment plan and buying an older, smaller vehicle cash.
- Go through all your statements and get a good overall picture of your debts and financial situation. Know exactly how much you owe on your assets as well as your unsecured debt (credit cards, personal loans)
- Make the decision to either try and contact your creditors directly or use a debt counsellor to do so.
* For questions on this topic email [email protected] or Daily Voice Facebook Messenger. Join Moeshfieka on Thursday live on the Daily Voice’s Facebook page at 2pm where she will answer some of your financial questions.
Moeshfieka Botha is Head of Research and Consumer Education at National Debt Advisors.
For more debt and personal finance information visit www.nationaldebtadvisors.co.za.