Skipping car payments could leave your credit record affected and ultimately you could have your car repossessed. Picture: iStock
At its most basic, a car is a simple mode of transportation that takes us from point A to point B, which is typically from home to work and back again. However, for some, a car is a status symbol which needs to have all the added frills, such as navigation systems and DVD player. Having the latest flashy car and the add-ons that come with it is perfectly fine, if you can afford it.
If you are drowning in debt and want to get rid of your car, there are a few options you can consider, which should put you back on track financially. It’s important to establish how much you owe on the car and whether selling your car will cover the loan. If the sale doesn’t cover the outstanding balance then you may have to consider other strategies which are listed below:
READ: How to start tackling the debt monster
1. Downgrade your car through a dealer: Consult your dealer and explain your financial situation. Tell them you’d like to trade in your car for a less expensive one. They may have several options for you even if they only have one particular brand. This option only works if your car is worth more or close in value to your loan amount. But generally this is not the case because cars can depreciate.
Use TransUnion’s 1Check app by scanning the licensce disc. It will provide you with in-depth valuations so you can ensure you get a good deal on your car.
If you want to sell or trade in your car shortly after you financed it, you may find yourself in a position where you owe more than what the car is worth. If you’re prepared to take a small hit though, this may help in the long run when you downgrade to a less expensive car.
Downgrading can make a big difference in your finance and insurance repayments. For instance, Nelisiwe Baloyi, head of Absa Vehicle and Asset Finance says the repayments on a BMW 318 valued at R563 800 would set you back R12 707 in loan repayments (without a balloon payment) and cost you R4 147 in insurance. However, if you downgraded to a 2011 VW Polo Comfortline valued at R129 999 you’d pay R3 003 in finance repayments (again without a balloon repayment) and R1 350 in insurance. That’s a saving of R12 501 in repayments and premiums if you downgraded from the BMW to the Polo! Think about what you could do with the extra money.
2. Sell your car through your bank: If your dealer can’t help you consider talking to your bank about about selling your car. Absa, for instance, has a private-to-private network where you can sell your car to an interested buyer that you may have already lined up. Absa facilitates the deal through its own bank-approved car agents and can arrange finance for the buyer if they need it. There’s a R5 500 facilitation fee attached to using this service, but this covers the vehicle inspection and registration. The fee is included in the purchase price so it’s the purchaser who will foot the bill. The bank can also arrange a warranty for the car that lasts for two years at R7 550. Selling your car through this type of arrangement may make the process a bit smoother and reduces the chances of fraud.
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3. Sell your car privately: Selling your car privately is possible on online classified platforms like Gumtree or you can also sell your car through an auction. When it comes to selling your car online, make sure you conduct all the necessary background checks you need to do on potential purchasers and take steps to ensure a safe sale. Selling a car privately could result in you getting more for it than a dealer would offer you so you’d lose less money in the process, particularly if you still owe money on the car. But this option comes with more risk.
4. Refinance your car: If selling privately or through a dealership is still not ideal for you consider talking to your bank to restructure your loan. They can ensure you pay less in instalments by extending the duration of the loan. If you’ve been a good creditor and loyal to your lender you may also ask if you can get a reduction on your interest.
READ: How to review your car insurance
There are several options for those struggling to make repayments on their car. But the worst thing you could do is put your head in the sand and ignore the problem. Because as soon as you miss or skip payments you could have your credit record affected and ultimately have your car repossessed.