Before the National Credit Act in June 2007, almost 85% of all cars were financed. The NCA changed that dramatically. For the first six months of 2007 the figures reversed themselves with almost 85% of cars sold being for cash. That figure is slowly changing as finance houses and the public are becoming accustomed to the NCA.
The big difference now is that your affordability is based on disposable income, whereas before it was based on your gross salary. There is a far greater focus on responsible lending. All the finance companies, with the possible exception of MFC, have seen a huge downturn in sales since June 2007.
The first thing to note when you apply for finance is that you will be required to bring the following with you:
Your Identity Book (A copy must be verified at the dealers)
Your valid Drivers License
Proof of Income (Pay slip or 3 months bank statements if self employed)
Proof of residential address. (A utility account is best)
The F&I (Finance and Insurance) manager who takes down your credit application must hold an NCA qualification. Ask to see his/her NCA Identity Card. He is required to have it on him. Once the application form has been completed it generally takes between 2 and 36 hours to get an answer, depending on which banks you are dealing with. Most car dealers will submit your application to more than one bank, so that you have freedom of choice – one of the hallmarks enshrined within the NCA.
Once you have been presented with written options of finance available, you may choose which bank you wish to deal with. The dealer will then arrange for a contract to be drawn up and a delivery date set.
If you sign the contract at a place other than the dealers premises or the credit grantors premises, you have a cooling off period of 5 days, within which period you may withdraw from the contract for a valid reason and hand the vehicle back to the credit provider.
In essence the dealer sells the finance to the bank and you then become the banks client for the duration of the contract. Many clients tend to go to the bank when they have dissent with the dealer, but unless something serious (like fraud) has taken place, the bank has no legal jurisdiction or power over the dealer to attend to any problems. In most cases the bank will diplomatically raise the complaint with the dealer and encourage some sort of compromise to take place.
The main players in the motor finance industry are (in Alphabetical order) ABSA, Motor Finance Corporation (MFC), Nedbank, Standard Bank, Wesbank (in no particular order).