We entered Level 4 of the lockdown on 1 May 2020. Though some restrictions have been lifted and some people (from certain industries) are allowed to go back to work – for many the struggle continues. Jobs have been lost and salaries have been affected. If your financial circumstances have changed and you have a monthly vehicle repayment to make, you need to know what your options are with your vehicle finance during lockdown.

According to all banks and financiers of vehicle loans, repossession is the last resort for them. Repossession of a vehicle ends in a no-win scenario for the banks and the consumer.

How can you make sure you don’t lose your car during lockdown?

Like with every other aspect of your finances right now – the best thing to do is to communicate with your creditors if you are having problems with your monthly installments.
There are options available even if you are already in default. It is general industry practice for legal action to take place once a client misses three payments.

If this legal action ultimately leads to repossession of your vehicle, it will in all probability be sold at auction for a fraction of the price – and most importantly you will still be liable for the shortfall.
Please note, that this is also the case after you have missed payments and you voluntarily surrender your vehicle to the bank. You will no longer have your vehicle, but you will still be liable to pay whatever is owed on it. So it is by far better to do whatever you can before it gets to this point.

Some of the options available if you have skipped payments is to pay back the arrears in a lump sum, over 3 months or at the end of the term. The options available vary from individual to individual, but the longer you take to pay back your arrears, the more interest will be added and the more costly your overall debt will become.
Depending on your standing with your bank, some banks have payment arrangements in place that extend to longer than 6 months.

In line with payment relief plans offered during Covid-19, banks have also put in place payment holidays/ breaks for their clients who are in good standing with their bank.
I would also encourage you to have a look at the credit insurance cover you may have on your vehicle finance. Policies and terms and conditions differ, but if you are paid up with your insurance premiums there is the real chance that your vehicle installments could be covered for a few months, but you won’t know until you make the effort to get clarity on it.

Some consumers who have taken stock of their financial situation over the last few weeks (even many who are up to date with installments) are also choosing to give up their vehicle because they realise they will no longer be able to afford it in the future.

Some banks are also willing to explore the option of an assisted sale. In this case, the bank will assist the client in selling the vehicle through a reputable motor dealership, to try and sell the vehicle for more than what it would be sold for on auction. The higher the price that the car is sold for, the less the shortfall that the consumer remains liable for.

The most important thing to do is to communicate with your bank even before you miss a payment. Sticking your head in the sand and being in denial serves you no purpose whatsoever. In fact, it only makes the situation worse.

Jana Coetzer, business support manager for MFC (the vehicle financing division of Nedbank, says they encourage their clients to pro-actively contact them and discuss their financial situation. During this process they may encourage clients to consider applying for debt counselling as prescribed by the National Credit Act, if this will help them to pay off their car or their shortfall.