Guiding consumers since 2009

Cars sacrificed as repo rate bites

By Staff Writer

Local auctioneers are reporting a “marked” increase in the number of repossessed property auctions as the interest rate rises start to bite consumers.

And auctioneer Dennis O’Connor said there were about 50% more repossessed vehicles when viewed against last year’s figures.

South Africa’s largest vehicle financier, Wesbank, reported in April that car repossessions went up to more than 1000 per month for the first quarter of 2008, an increase of 67% from 2007.

According to O’Connor, most of the cars that go under the hammer are entry-level models as opposed to luxury brands, a sign that the lower end of the market was under more pressure from interest rate hikes which render consumers less able to keep up with bond and car payments.

“We’ve definitely seen a big increase in foreclosures in bonds, but not necessarily following through to the sale of the houses,” said O’Connor. “There are a lot of car repossessions; I’d say about 50 percent more than last year.”

Mark Rose-Innes of Rose-Innes & Scheepers Auctioneers said he had also noted an increase in car and house repossessions of around 20% compared to a year ago.

However, Rose-Innes said the number of repossessions vary from the luxury upper end consumer brands to the lower end.

The failure of consumers to keep up with payments has prompted the big four banks to call on customers to renegotiate terms of settlement when faced with financial difficulties culminating from the higher interest rates.

The Reserve Bank has been hiking the repo rate consistently by 50 basis points since June 2006, leading the prime lending rate to rise to the present 15%.

The next interest rate decision will be made by the SA Reserve Bank on Wednesday next week.

East London debt adjusters also confirmed an upsurge in the number of people not being able to meet their debt re-payments.

Debt Relief, a company that focuses on debt collection and litigation, said people were being far more careful with their money in light of the interest hikes.

“Customers are not always innocent victims, however,” said Ian Runchman of Wylde and Runchman Attorneys. “Many intentionally over-extend themselves by purchasing unnecessarily and buying luxurious items on credit or by taking loans rather than reducing their expenditure.”

Some credit granters, he said, made it difficult for customers to understand the terms and conditions related to their debt. Customers should also be aware of their ability to repay their debt, he added. Runchman urged financial institutions to ease the debt burden by reducing administrative charges and interest rates. - By SIYA MITI and LERATO MATSANENG

Recent Articles

Featured Travel ban – how to claim for the loss incurred

As with the recent Covid-19 pandemic, governments sometimes issue travel bans to prevent people from travelling to other countries. This becomes even more complicated if you’ve already planned and paid for your trip. Your flights will be cancelled, and you may lose money from cancelled accommodation arrangements. How do you claim for the financial losses incurred due to a travel ban?

How to finance and insure a second-hand vehicle

Buying a second-hand vehicle may suit your budget better than acquiring a new one. But what impact does an older model have on vehicle finance and car insurance? We reached out to specialists in the field to explain what the financial implications are of pursuing a second-hand vehicle.

Reading your loan agreement: look out for this

Many people don’t read their loan agreements. They just sign on the dotted line without realising that they could be signing their lives away. But it’s important to review your loan agreement before and after taking your loan to avoid future setbacks.

 

Part 1: The difference between good and bad debt

In the first part of our Debt-ucate series we explore the difference between good and bad debt and why debt is, in fact, necessary.

Deals

Udemy online course for R180

Price: R180
When: Until 27 March 2020
Where: Online

Educate your kids for free with Skills Share

Price: Free
When: Daily
Where: Online

Take advantage of payment holidays from Standard Bank and Nedbank

Price: Free
When: From 1 April to 30 June 2020
Where: Nationwide