Life happens, whether it’s a job loss, unexpected expenses, or unforeseen events like COVID, many South Africans find themselves struggling to keep up with vehicle repayments. If you’ve financed a car, it can be stressful knowing that you owe the bank and might not be able to afford your instalments anymore.
The good news is that you do have options, but timing is everything. The earlier you act, the more choices you’ll have.
In this blog, we’ll explain what your options are if you can no longer afford your car finance, the pros and cons of each, and important realities you should be aware of.
Act Early – Don’t Wait Until You’ve Missed Payments
We can’t stress this enough. As soon as you realise you’re starting to fall behind, contact the bank you finance with or speak to a finance facilitator like Motorlease.
Too many people reach out after missing three or four payments, by which point their credit profile is negatively affected, options like refinancing are off the table, and repossession risks are high.
You know your financial situation best, act at the first sign of trouble. Waiting limits your options and damages your credit score.
Your Options When You Can’t Afford Your Car Anymore
1. Refinance your vehicle
If you’re still up to date with payments and your credit record is clean, you might be able to refinance your vehicle over a longer term to reduce your monthly instalment. This can give you some breathing room without losing your car.
Important: This is only possible if you approach the bank before falling behind on your instalments. Once there are arrears or defaults, banks are not likely to approve your finance.
2. Sell the Vehicle Privately and Settle the Finance
The best option is often to sell the car privately (a private-to-private sale) for a fair market price if you’re in a position to do so. However, this isn’t always possible, especially if the settlement amount owed to the bank is significantly higher than the vehicle’s current value, which presents a whole new set of challenges.
Pros:
- You’ll likely get a better selling price privately than if the vehicle is repossessed and sold on auction.
- Avoid repossession and the associated costs.
- Close your finance account on your terms.
Important: Always remember, if the vehicle has outstanding finance, the bank won’t release the NATIS document (ownership papers) until it’s settled in full.
3. Downscale to a More Affordable Vehicle
If your financial situation is tight but you still need a vehicle (and most of us do — it’s a catch-22 when you need your car to get to work), another smart option is to sell your current vehicle and replace it with a cheaper, more affordable one.
This works well when:
- The settlement on your current car isn’t too far above its market value.
- You can sell it privately for a fair price.
- You can settle the finance and use any available funds as a deposit on a more budget-friendly vehicle, with lower repayments.
Downsizing can immediately reduce your monthly expenses while still keeping you mobile.
3. Voluntary Surrender (Last Resort)
You can voluntarily hand the vehicle back to the bank. They’ll auction it and use the proceeds to reduce your outstanding debt.
Pros:
- Avoids legal repossession and the costs associated with it.
Cons:
- Auction prices are typically low.
- You remain liable for any shortfall after the auction sale.
- Damages your credit profile.
Important: This should be a last resort, and only after understanding the final financial implications.
Final Advice
We regularly see clients try to refinance or trade in their vehicles after months of missed payments or late instalments. By then, their credit report reflects this, making approval difficult.
Some other realities to consider:
- Balloon Payments: These deferred lump sums often come due when you least expect it, and few people have that kind of cash lying around.
- Overvalued Purchases: Many people buy cars priced way over book value, meaning they owe more than the car is worth almost immediately. When it comes time to sell, you’re stuck.
- Settlement Process: A financed vehicle’s ownership legally belongs to the bank until the finance is settled in full and the original NATIS document is released.
- COVID Lessons: Financial situations can change overnight; acting early is the only way to stay ahead.
Don’t wait for the bank to repossess your vehicle or for your credit profile to take a knock. Financial setbacks happen, but the way you manage them makes all the difference. By acting early and exploring your options, you can avoid long-term financial damage and take control of your situation.