OVER-INDEBTED consumers struggling to make monthly payments on their vehicles caused by the high cost of living and exacerbated by constant fuel increases should not bury their heads in the sand but rather opt to sell before their cars are repossessed as they will still owe the bank while being left with no wheels.
This is according to Renaldo de Jager, the co-founder of new online auto auction platform, Auction.co.za.
De Jager and co-founder William Miller started the platform when they realised there was a gap in the market for a fairer process that could potentially help those struggling to make monthly payments on their cars.
De Jager said that with the price of fuel set to increase yet again next month, petrol was already becoming unaffordable for many.
“Times are tough and, understandably, many are falling behind on debt repayments. The number of cars being repossessed in South Africa is rising. And, unfortunately, the current repossession process is strict and significantly unfair towards both the consumer and the bank,” said De Jager.
Ian Wason, the chief executive of Intelligent Debt Management (IDM, DebtBusters and Consumer Debt Help), confirmed that the firm was seeing a big increase in consumers seeking help, especially to prevent them losing their vehicles and homes.
Wason said that from September, IDM had been experiencing an unusual spike in debt management inquiries, up to 20% more than last year.
“The VAT increase that took effect in April this year, coupled with South Africa slumping into a recession a few months later, as well as continuous fuel increases, is definitely taking its toll on consumers. Of the consumers coming to IDM for help, 47% of their debt was unsecured debt, with significantly less fewer credit agreements (7.3 on average compared with 9 agreements in 2015), which indicates that consumers are becoming over-indebted more quickly compared to previous years.”
Wason added that 21% of the firm’s clients had vehicle finance and 32% have home loans.
De Jager said the current repossession process kicked in when a consumer was three months in arrears on car payments.
He added that after this point, it was unavoidable that the bank would repossess a consumer’s vehicle.
“The ultimate outcome is that you could end up with no car and still owe the bank money. So if you’re in trouble, don’t bury your head in the sand and instead sell your car before you are at risk of repossession.”
This article was first published by Cape Argus (AM Edition) on the 22 October 2018