Thabang asks: A friend of mine bought a car and now he can’t afford the installment. Is it wise to take it back to bank or to a dealer and will he get something back?
Maya replies: It is very important that your friend sells the car rather than waiting until the bank repossess the car. Repossessions sell for well below the market price.
If the car is less than two years old it is most likely that the outstanding balance is higher than the value of the car because cars depreciate by around 25% in their first year.
As you will see from the response from Absa, your friend will get the best deal by selling privately – but follow some important rules to make sure he is not conned. Alternatively he can sell through an accredited dealer.
Your friend should also contact the bank and see if an agreement can be arranged to pay the car back over a longer period of time. Even if he still has to sell the car, he could come to an arrangement to pay off the remaining debt. The banks all have departments dedicated to dealing with over indebted customers.
Response from Absa
Selling a car: Tips
Where the best solution is to sell the car in order to settle the existing finance settlement amount, two options can be explored: selling to a dealer or selling to a private individual or entity.
Selling to a dealer
When selling to a dealer, we recommend that the seller only conduct business with bank-approved dealerships.
All Absa Vehicle and Asset Finance (AVAF) approved dealers are subjected to a stringent vetting process and are required to enter into a master discounting agreement with the bank.
The master discounting agreement binds the dealer to a number of conditions and compliance with all relevant legislation.
Additionally, Absa prescribes the following guidelines when selling a car (currently bank-financed) to a dealer to ensure that you get the best price possible.
• Step 1: Find out if you still have an outstanding balance with the bank.
• Step 2: Establish what the vehicle is worth. Second hand vehicles have two values:
Trade – The trade value is approximately the figure the dealer will offer you when you trade-in or sell your car. The value will be influenced by the condition and mileage of your vehicle.
Retail – Retail value / market value is the approximate amount you could get for your vehicle if you had to sell it privately.
• Step 3: You can then choose either to sell the vehicle privately, or trade in the vehicle at the dealership where you are intending to buy, whichever is the best option for you. The amount that you receive for the vehicle must be enough to settle the existing finance settlement amount.
Buying or selling a car through a Private Transaction:
Buying or selling a vehicle privately is a financially-viable option but should be approached with caution. Absa offers vehicle finance to existing customers who wish to sell or buying cars privately through its accredited database of Private Deal Motor Dealerships.
These dealers assist in facilitating the private transactions, providing advice to both buyer and seller. As such they make the process less cumbersome, safer and more cost effective for our customers.
It is important to note that a buyer / seller agreement will need to be completed and endorsed by the facilitating dealer.
The costs payable to the dealer for their services in facilitating the transaction have been structured as follows:
• 3% Facilitation fee which is normally shared by the buyer (1, 5%) and the seller (1, 5%). Please note: Depending on the value of the transaction and the complexity thereof, this cost may be open to negotiation with the respective motor dealer.
• R750 Administration, Registration of Natis Documentation & Licence renewal fee. In the event of additional costs incurred to source and obtain duplicate documentation and AA report on behalf of the seller, the extra costs may be recovered by the dealer.
The abovementioned fees do not accrue to Absa, but to the dealers.
It is also important to note that there is no recourse or claim against the dealership arising out of defects or repairs to a vehicle purchased privately.
If you are about to buy a car remember that interest rates are on the way up. Rather buy a cheaper model so you can put down a larger deposit. Also make sure that you can manage a 20% increase in repayments should interest rate increase significantly
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