A car, priced by more than one bank.
Dealership finance is one desk calling the banks it has a relationship with. This is your application, in front of them all, with what you will actually pay in writing.
- Usual term
- 5 yearsMost banks stop at 6; a few will write 7
- Security
- The vehicleAn instalment sale under the National Credit Act
- Balloon
- OptionalA lump sum due at the end, not a discount
- When it is done
- Paid outTo the dealership, usually within days
What you are signing
Vehicle finance in South Africa is almost always an instalment sale agreement. The bank buys the car and you buy it from the bank over the term; it stays the bank's until the last payment clears. That is credit under the National Credit Act, which means the affordability assessment is not optional and the cost of credit is capped.
The balloon is the part people get wrong
A balloon — a residual — is a slice of the price you agree not to pay during the term. It makes the monthly instalment smaller, which is exactly why it is offered to you on the showroom floor, and it does not make the car cheaper. At the end of the term that amount is due in one payment, and you pay interest on it the whole way.
There is a second trap behind it. A car depreciates faster than a balloon amortises, so for much of the term you can owe more than the car is worth. If you need to sell or it is written off, that gap is yours.
New, used, and what the bank thinks of each
Banks price age and mileage, and most will not write finance over a term that ends when the vehicle is past a certain age. A five-year-old car on a six-year term is usually where that starts to bite. It is not a refusal so much as a shorter term and a higher rate, which is worth knowing before you have fallen for something on a forecourt.
What you will need
Straight off the application's own checklist. The ticked ones are required; the rest are asked for only where they apply to you.
- ✓The dealer's quote or invoiceMake, model, year, mileage and the price, on the dealership's own paper.
- ✓Your driving licenceBoth sides.
- ✓Three months of payslipsSix if commission or overtime is a real part of what you earn.
- ✓Three months of bank statementsIn the bank's own PDF.
- ✓Your IDBoth sides if it is a card.
- +Proof of addressUnder three months old.
Questions
Is dealership finance not easier?
It is quicker on the day. The dealership's finance desk works with the banks it has arrangements with, and it is paid on what it writes. That is not dishonest, but it is not the same thing as your application being priced by every bank that would write it.
Should I take the balloon?
Only if you have a specific plan for the lump sum — a trade-in you are confident of, or money you know will be there. Taking it to make the monthly number fit is how people end up refinancing a depreciated car at a worse rate.
Can I finance a car from a private seller?
Some banks will and some will not, and those that do usually want a roadworthy certificate and their own valuation. It is worth asking before you agree a price with the seller.
What deposit do I need?
Often none, but a deposit does two things here: it lowers the instalment and it narrows the gap between what you owe and what the car is worth, which is the gap that hurts if the car is stolen or written off early.