A North Gauteng high court ruling recently found that vehicle financing houses are not required to repay customers for “on-the-road” fees.

This related to a finding in 2017 by the National Credit Regulator which determined that the “on-the-road” fees charged by dealerships should not be included in the financing costs and should therefore be repaid.

The high court over-ruled this and determined that the “on-the-road” fees are part of the sale process and not done by the financing house.

“The financier merely finances the principal debt, which is constituted the purchase price, and other extras including the ‘on the road’ fee plus other services,” explained Judge Patrick Malungana

While the high court ruling is logical, it highlights the importance of making sure you know what you are paying for, and the cost of financing those extra costs.

Advertising around cars can be misleading. You will see adverts offering a car for “only R4 999 a month” but the very small fine print explains that this is only if you pay over 72 months and have a 30% residual.

But why do dealers use “on-the-road” fees?

To some degree, “on-the-road” fees are being used to make a car appear less expensive. When my son enquired about a second-hand car advertised for R150 000, the dealer quoted an additional R10 000 as an “on-the-road” fee.

When we queried this, they said it was the cost of licensing the car, cleaning it and some other arbitrary things. The true cost of the car is therefore R160 000, but they advertise a lower price to get you in the door.

Once you fall in love with the car, and with the added pressure from the salesperson, it is easy to sign on the dotted line.

We have previously written about City Press reader Walter who contacted us when his R99 000 car ended up costing R127 000 once all the “extras” were included.

In addition to a “service and delivery” fee, there was a maintenance plan, warranty and windscreen protection.

There is nothing wrong in principle with these extras, but Walter was not aware of what he had signed up for. He has never even used the maintenance plan that he had paid for, and he does not understand the various insurances he has taken out.

What was also concerning was that these extra costs were capitalised and added to the principal loan and therefore incurred finance charges. These finance charges meant that Walter would have paid R36 939 extra, or R513 more per month over the 72-month loan period, even though the maintenance plan was only for 24 months.

If Walter had paid for the maintenance plan and warranty upfront and had not capitalised it into the loan, he would have saved himself R10 000 in interest payments. Alternatively, Walter could have opted for a debit order payment for the insurances rather than paying upfront, which has the advantage that he could cancel if he could no longer afford it.

Take your emotions out of the decision

When making a big purchase we make far better decisions in a “cold state” where our emotions are not in play, and we can work with just the facts to make better decisions.

If you are buying a car or even taking out a personal loan, take time to move into a cold state before you start signing. Ask for the paperwork to be printed out and then read through it at home, not in the dealership. Write down any questions you have and make sure you fully understand everything before you sign.

In my son’s case, he simply refused to pay R10 000 for the “on the road” fees and they discounted it to R1 500.

Lesson learnt: read the fine print and negotiate if you believe it to be unfair.

This article first appeared in City Press.