You've qualified!
Very few buyers have the financial reserves to buy a car without resorting to a finance agreement. However, not all buyers are eligible for car finance, and it depends on two main factors: creditworthiness and income. Remember that if you are looking to sell your car, you can do it here!
Related: How to apply for car finance at the dealership
Creditworthiness
At minimum, we believe a R6500 ongoing salary with a good credit record is enough to be considered for car finance. You also need to be over the age of 18. Here's what credit score is needed.
As with any loan, the financiers want to be sure that they're lending money to a dependable client. To this end, the loan applicant is screened according to their credit rating. The credit rating is determined by the applicant's prior credit history: how much they've borrowed in the past, and how dependable the repayments on those loans have been.
Credit ratings are also influenced by other factors, such as the applicant's current debt load, and whether debit orders have been rejected due to insufficient funds. If the applicant already carries too high a debt load in relation to their income, an additional loan is likely to be rejected. Likewise, rejected debit orders point toward poor financial discipline, which will also raise red flags at the financial institution. Where could you finance a car with bad credit though?
Disposable income
An applicant also needs sufficient disposable income to pay off a car loan. Financial institutions usually work on 30% of the applicant's post-tax income as an upper limit to car loan repayments – if the car for which finance is desired would end up costing more than that every month, the loan is likely to be rejected.
Alternatively, longer-term loans can be negotiated, which will have the effect of dropping the monthly loan repayment, albeit at the cost of an increased interest load. It also helps if the loan applicant can put down a substantial deposit before attempting to obtain finance, as that deposit will reduce the total loan amount, lower the risk of a default on the loan, and ultimately result in lower monthly repayments. Could you buy a car with a credit card?
A steady income helps a lot
In most cases, the financiers will require proof of employment and at least 3 (but in many cases, 6) months' bank statements as well as corresponding payslips. That's fine and well for applicants with full-time employment, but self-employed people will have a considerably more difficult job to prove their loan worthiness.
That's where financial stability would come in handy: if the applicant's bank statements can prove that they do in fact earn enough (and steadily enough) to qualify, and with a well-managed debt load, the chances of a successful application improves considerably. It's still not going to be easy for the self-employed, though...
There are various factors that influence whether an applicant would be eligible for finance or not. The best bet to indeed qualify for that loan is for the applicant to prove that they're financially responsible, have the money to spend, and never renege on old debt. And then, suddenly, that shiny new car doesn't look so unattainable anymore.
Foreign influence
Unfortunately, ex-pats are going to have a tough time financing a vehicle purchase locally. Most, if not all, finance houses in SA require a South African driver's license to get the ball rolling. In a few documented cases foreign nationals have been able to finance a vehicle but they have gone through the process of obtaining an SA driver's license or going through the laborious process of getting a Traffic Register number, which requires work permits, long-term Visa's, local bank accounts, etc.
Our system is just not geared towards this type of situation and even after many of the requirements have been met, the finance house can still refuse to extend the loan.
The only two surefire ways of having vehicle ownership are to buy the vehicle with cash outright or obtain an SA driver's license.
