The rising cost of living exacerbated by petrol price hikes, the VAT increase and other often unforeseen expenses, sees many of us finding our wallets and bank accounts stretched beyond the limit. Often these changing circumstances influenced by economic and political factors forces consumers to reconsider their spending choices. Often, however, these choices lead to consumers electing to miss or even not pay their monthly vehicle installments.
“It is vital for you to be aware that not paying your instalments is a breach of contract and may eventually lead to the repossession of your vehicle – so it is important to make sure that you find a way to avoid this before it happens,” says Charl Potgieter, Head of Personal Markets at Absa. “Consumers are faced with increasing costs impacting their net disposable income and did not account for fuel, maintenance and even interest rate increases. This means that what was initially affordable for the consumer, has now become unaffordable.”
The good news is that you can minimize the anguish of having to part ways with your faithful four-wheeled friend if you find yourself battling or simply unable to make those installments every month.
Here are a few top tips on the options you can consider if you find you can no longer afford your monthly vehicle installment:
1. Go speak to a financial advisor at the bank where your car is financed. This should be your first action because banks have experts on hand to best advise you on exactly what options are open to you and will depend on the vehicle finance plan and additional products and services you have selected.
2. Depending on your circumstances, there may be value-added-products that provide relief. Most banks offer additional products and services such as credit protection that help protect your vehicle finance agreement and minimise potential risks you face. Credit protection typically covers eventualities such as death, permanent and temporary disability, dread disease and retrenchment – depending on what option you have selected. If you have a value-added product or service in place, your advisor will be able to help you understand what it covers and what Options are available to you. A mechanical warranty product will contribute towards mechanical failure should you have a policy in place.
3. Cutting out non-essential monthly expenses could allow you to cover your instalment. Go through your monthly budget item-by-item. If you don’t put your budget down on paper, there are templates you can download that will make it easy for you to track your monthly debit orders, spending and other deductions. Seeing it in black and white will help you visualise exactly what is coming in and going out of your account and you will be able to determine where you can make changes or cut out unnecessary costs and redirect them to where they can be put to better use. If looking at figures leaves your head swimming, make that call and visit the bank’s financial advisors. You may well be able to make the necessary lifestyle changes that will help you keep your car.
4. You can trade in for a more affordable vehicle or sell your vehicle altogether. You can go to a reputable dealer to establish the trade-in value or negotiate the sale of your vehicle. This will help you determine what other vehicle is a more realistic option in your price range or else provide a much-needed cash injection to ease financial pressure.
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5. Alternatively, you can also look at the option of selling your vehicle through your bank. Absa has a private-to-private network where the bank facilitates the deal through its own bank-approved partners and can arrange finance for the buyer if they need it.
6. You can also sell your vehicle privately through online platforms, auctioneers and others. However, this comes with considerably higher risks, particularly of fraud in the event that your account is not paid up. Remember that you will still be held liable for vehicle instalments until the vehicle is no longer in your name.
7. Refinance your vehicle. If the settlement value of your vehicle is higher than the trade-in or market value then, your next step is generally to consider extending the payment period of your loan. You can talk to your bank about restructuring your loan to make your monthly obligations more manageable.
None of us ever want to find ourselves in a tight financial situation where we can’t pay our monthly vehicle installments – but sometimes this happens and it is important to remember not to panic and to reach out for help. “It isn’t often that there isn’t a solution – especially if you collaborate with the people that deal with these matters on a daily basis. Industry leaders like your bank will work with you to come to an arrangement that will help you survive tough times,” concludes Potgieter.