Auto repossessions are on the rise after closing. Here’s how to avoid having your car repossessed.


(Getty)

  • Auto recoveries are up to pre-closing levels and likely to rise.
  • There are ways to avoid repossessing your car, starting with talking to your bank early.
  • Some lenders will help you sell a car that you can no longer afford, and you may be able to save on costs by returning the car rather than having it taken away.
  • For more stories go to www.BusinessInsider.co.za.

During April and May, auto recoveries dropped to almost zero as a hard shutdown shut down auto dealerships and licensing offices.

Now, the auto recovery rate by major South African banks has generally returned to where it was before the shutdown began in March, and is likely to rise. Industry experts say the end of bank aid measures for struggling consumers, and a recession that is expected to hit, will see new highs in recoveries.

Absa, Standard Bank and Nedbank report that auto loan arrears and impairments are increasing.

For the semester ended in June, Absa reported that its vehicle and asset financing unit experienced impairments of R2.129 billion, compared to R548 million in the first half of 2019.

Absa’s credit loss ratio increased to 5% at the end of June from 1.4% at the end of June 2019. The bank provides financing to more than 400,000 clients who have obtained R87.6 billion in auto loans.

Standard Bank’s auto recovery rate increased from 0.25% to 0.32% of the bank’s total auto loan book value, says spokesman Ross Linstrom.

Nedbank, which provides R106 billion in financing for around 670,000 cars, was recovering 1,200 cars per month before the national shutdown began, and the level of recoveries was there in July and August.

Nedbank’s portion of auto finance borrowers in default had risen to 7.6% at the end of June from 5.5% at the end of December last year, says Trevor Browse, chief executive of Nedbank’s Motor Finance Corporation.

Wesbank is also experiencing recoveries to similar levels to before the close, says Lebogang Gaoaketse, Wesbank’s director of marketing and communication.

How to avoid having your car repossessed

DebtBusters Says Car Reposses Are Avoidable if a consumer struggling with refunds negotiates different terms, sells his car, or files for bankruptcy.

“If your credit history is relatively good and you have not yet defaulted on your car loan, but you are concerned about keeping up with those payments, check with your lender to extend the duration of your loan to lower your monthly payments,” DebtBusters adds.

“If the lender agrees, you will pay more interest over the life of the loan, but that compensation can help you keep your vehicle.”

You can return your car to the lender if you and your lender cannot reach an agreement and when selling it is not a viable option.

“Doing so is called voluntary recovery. The main benefit is that you do not have to reimburse the lender for the costs of recovering the car. However, you may still have to pay the lender for the costs of storing and selling it, ”says DebtBusters.

It’s best to talk to the bank when you know you’re in trouble, and even before you know you may miss a payment, says Nedbank’s Browse.

“We have several measures that we can work with you to prevent your car from being repossessed,” he adds.

Nedbank’s Motor Finance Corporation suggests that if you are having trouble with your car payments, you can also apply to the bank to restructure your car loan or seek help from the bank to sell your car.

WesBank’s Gaoaketse says auto loan clients should keep a close eye on their finances and budget appropriately.

“WesBank customers who are unable to meet their vehicle payment obligations due to financial problems are encouraged to contact us as soon as possible to discuss possible alternative payment arrangements. Defaults on payments will always lead to consultations between the bank and the customer, ”says Gaoaketse.

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