Thinking about paying off your vehicle finance early? Settling your car finance can save you money on interest, improve your credit score, and give you financial breathing room. It’s important to understand how early settlements work in South Africa, what charges might apply, and what steps to follow to avoid delays.
This guide covers everything you need to know about early vehicle finance settlements in South Africa, including penalties and the settlement process.
What Is an Early Settlement?
An early settlement happens when you decide to pay off your remaining vehicle finance balance before the agreed contract term ends. Thanks to Section 125 of the National Credit Act, South African consumers have the legal right to settle their vehicle finance agreements at any time, with or without advance notice to the credit provider.
Do You Pay a Penalty for Settling Your Car Finance Early?
In South Africa, most vehicle finance contracts under R250,000 don’t carry early settlement penalties. However, if your financed amount was over R250,000 and you didn’t give the required three months’ written notice to your bank that you intend to settle, you’ll likely be charged an early termination fee.
Lets break it down:
- If your finance was under R250,000 → No early settlement penalty applies.
- If your finance was R250,000 or more → The bank can/may charge an early termination fee (usually equal to three months’ interest on the remaining balance).
Tip: Some finance providers may waive or reduce this fee if:
- You give 90 days written notice before settling, or
- You finance a new vehicle through them.
Every bank has slightly different policies, so it’s important to confirm this with your finance institution when you request your settlement quote.
How to Get a Vehicle Finance Settlement Quote
Settlement quotes are easily accessible through:
- Your bank’s mobile app or internet banking.
- Calling your bank’s call centre.
- Visiting a branch.
- If Motorlease is handling your transaction, we can assist in obtaining this for you.
A settlement quote typically includes:
- Outstanding capital balance
- Unpaid interest and admin fees to date
- Early termination fees (If applicable)
- A courier fee to send the original Natis to you once your finance is settled in full
Important: A settlement quote is typically valid for around 5 days, though some banks may offer slightly longer periods. If you miss this deadline, you will need to draw a new settlement.
How Are Early Settlement Payments Processed?
One of the most misunderstood parts of early settlements is what happens once you make the payment.
It takes a little time for the payment to reflect and the account to show as closed.
Here’s why:
- The funds first go into the banks suspense account (holding account).
- It takes around 48 hours for the money to be allocated to your vehicle finance account.
- Only after this will the account reflect as settled in full.
This often concerns sellers, especially in private vehicle sales as they are supplied the proof of payment but the finance account still shows an outstanding balance. Don’t panic, this is standard for all banks in South Africa.
What Happens After the Car Finance Is Settled?
Once your vehicle finance is officially settled, it’s your responsibility to:
- Request a Paid-Up Letter: This confirms the account is closed and has a zero balance.
- Request the Original NATIS (Registration Certificate):
– Without this, you cannot legally remove the bank as the Title holder of the vehicle nor can you sell the vehicle until that is done.
– Some banks offer a service where they’ll arrange the change of Titleholder for you, for a fee.
– It normally takes 7–10 working days to receive the NATIS after requesting it.
– Always get a reference number when you request it to track progress.
Important:
We often come across cases where people settle their vehicle finance but forget to update the titleholder details and obtain a new NATIS listing themselves as both the owner and titleholder. Many also forget to request the original NATIS from the bank, sometimes only realizing years later when they need to sell the vehicle. This causes unnecessary delays and complications during future sales. Don’t let this happen to you, attend to this as soon as the finance has been settled.
Can I Track the Status of My Settlement?
Yes. Most banks will reflect the account closure in their apps after about 48 hours once the funds have cleared. Alternatively, you can call their finance department or call centre to confirm.
Why It’s Easier With Motorlease
When Motorlease handles your vehicle sale, we manage everything on your behalf, including obtaining the settlement, settling the finance, and completing the change of ownership.
We work directly with all major vehicle finance providers in South Africa and handle vehicle finance settlements daily across all major financial institutions, including:
- Absa
- WesBank
- MFC (Nedbank)
- Standard Bank
- MQ Finance
- BMW Finance
- Alphera Financial Services
- Toyota Financial Services
- Investec
- Ford Financial Services
- VW Financial Services
(and others)
With over 30 years of industry experience and a registered FSP number (8846), we know how to get it done quickly and safely.
Final Thoughts
Early settlement can be a smart option depending on your financial situation. You need to understand the settlement process, confirm whether you’ll be charged a penalty, and make sure you request your paid-up letter and NATIS document without delay.
Selling Your Car? Refer Your Buyer to Motorlease
If you’re selling your vehicle privately and the buyer needs finance, refer them to us. We arrange private-to-private vehicle finance, handling everything from the application and finance approval to inspections, documentation, and ownership changes.
One application. Multiple banks. Best rates. Full protection for both buyer and seller.