What’s the minimum income for a car loan?

By Harper Banks

Vehicle finance allows you to purchase a vehicle today and slowly pay it off. When you apply for this, your prospective lender will consider several factors, including your income.

We find out the minimum income lenders will accept from an applicant, and we briefly consider what else you should keep in mind when applying for vehicle finance.

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What is the minimum income for vehicle finance?

Nunben Dixon, head of Gumtree Auto, says that, according to the rules of the National Credit Act, your car loan must be no more than one-third of your disposable income.

“To qualify for a car loan, you must be 18 years or older, be a permanently employed and salaried individual, and hold a valid South African driver’s license without endorsement,” says Dixon.

In his experience, depending on your existing financial obligations, the majority of finance houses will consider your application if you have a regular salary of at least R6,500 per month.

Similarly, Allesha Chetty, finance and insurance manager for Group 1 Renault at The Glen branch, says that she has found that the minimum income required to qualify for a car loan is R7,500 per month.

The exact amount will depend on the provider you’re working through, and how they choose to calculate affordability. Some are comfortable with smaller incomes, such as R6,500 per month, while others won’t accept an income that’s lower than R7,500 per month.

You can increase your chances of approval by either increasing your income or decreasing your expenses. However, this is not all a lender will consider. 

What else influences your vehicle finance application?

Dixon says that there’s more to consider besides your monthly income. He explains that banks and financial institutions aren't always eager to finance car loans that are too small.

“Most will not consider a loan of less than R100,000 and they will not finance a car that is older than 10 years, which reduces the options you can choose from,” says Dixon.

He also points out that, besides considering whether you can afford a car loan, you should also enquire about insurance options, since this is usually compulsory when you take out vehicle finance.

“The cost of maintaining and insuring a vehicle should always be taken into account before acquiring finance,” says Dixon.

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