Selling your car shouldn't be a difficult task. In fact, AutoTrader makes it very easy indeed. To get an accurate idea of how much your car is worth, you can get a free car valuation here. After which you can decide if you would like to join thousands of happy customers and sell your car here on AutoTrader. If you are in a hurry, why not try our Instant Offer tool here? But before you sell your car, let us find out if you can do so while the vehicle is still under finance.
Related: Top tips to advertise your car for sale online
What if I can no longer afford my car?
Life is never predictable. You’re sailing along nicely in the medium-to-fast lane, nice and relaxed after a package holiday in Mauritius, and you are up for promotion in a few weeks’ time. Then, overnight, your world is turned upside down. Your company, against all expectations, loses the major contract that you were earmarked for as the project leader.
A flash flood causes huge damage to the structure of your house, and your insurance won’t cover the replacement of your huge perimeter wall that now needs rebuilding. And your spouse’s hapless second cousin, also hit by flood damage and a crash in the job market, has to move in with you. Rent-free!
Suddenly, there is only one solution available to you. That prized luxury SUV that has brought you so much pleasure on your daily commute has to go! The big question is, can you sell your car if it is still under finance and is, thus, effectively still owned by the finance company? And if so, what are the options available to you? Can you cancel your finance agreement early?
Related: What mileage is good for a used car in South Africa?
We approached Rudolf Mahoney, Head of Brand and Communications at WesBank, for a comprehensive solution to a situation that, unfortunately, does occur all too frequently in a tough South African economy:
It depends on the customer’s situation. Consumers fall into financial difficulty mainly as a result of one of two reasons. Firstly, the consumer’s income has been affected in some way or another, for example, retrenchment. Secondly, the consumer’s income has remained the same, but their expenses (including debts) have spiralled to such an extent that their disposable income has been eroded. The reason for noting these is that there are different remedies for each of the scenarios.
Opting for debt review
In scenario two, the consumer can opt for a Debt Review. The consumer will be able to keep his car, and the debt review agent will act on the consumer’s behalf in order to engage/negotiate with all of the creditors until the consumer’s disposable income situation has recovered and his accounts have been repaired.
Opting for a cheaper car
The consumer can also opt for a cheaper car, thus taking the car to a dealer in order to trade it in for a car where the instalments are much more affordable. It’s important to note that one cannot take out any new debt while under debt review. Trading in the car requires that the settlement value on the existing car be more or less in line with the trade value of the car so that the dealer will be able to settle the related finance with the bank and still be able to sell it again. If the outstanding balance or settlement is significantly higher than the market value of the car, there is no incentive for the dealers to trade in the car. In this instance, it would be wise to look for the best deal and not specifically the preferred choice of car.
Related: How to sell a second-hand car
If you want to sell your car instantly, we now make it easier than ever with the introduction of our new Instant Offer service. After following this simple 3-step process, you will get a market-driven valuation for your car within minutes and a solid cash offering within hours – safely, conveniently, and with total peace of mind.
Find out about trade-in assistance and cash-back incentives
What this means is that the manufacturers are offering very attractive marketing incentives in order to stimulate the new car market. These marketing incentives, such as trade-in assistance and cashback, can mean the difference between trading in one’s car or not. In this instance, it would be wise to consider such a deal (regardless of the car that’s on offer) to get out of the immediate financial trouble.
The new finance deal can be re-structured
The structure of the new finance deal can also be used to further assist the consumer. The NCA now allows much more flexibility in the finance structure, such as financing cars over 72 months. Adding a balloon payment to the end of the contract also makes the monthly repayments more affordable. The consumer, however, must be aware that this option requires a large amount to be paid at the end of the term.
Refinancing the existing loan is an option
Refinancing the existing loan agreement is also sometimes an option. It works best if the consumer has been paying off for a couple of years. Refinancing basically means that the outstanding balance of the loan amount gets refinanced over a new term. For example, (just for illustrative purposes), if you bought a car of R250 000 and financed it over 72 months, the repayments would be more or less R4 900 (at an interest rate of 12% with no deposit and no balloon). If you paid the instalments for 36 months, the balance would have been reduced to +-R150 000. If you refinanced the R150 000 over another 72 months, the instalments would be reduced to R2 900.
However, one needs to consider that one will be paying off the same car over 108 months or nine years. In the short term, this might offer relief to the consumer, but over the long term, the consumer will be ‘worse off’ because he will be driving an old car with high mileage; whatever the consumer is saving on the instalments, he will be expending on maintenance, etc.
It is advisable to get insurance against retrenchment
Scenario one is, of course, the more serious of the two. It is always advisable for consumers to opt for retrenchment cover. This insurance policy will assist the consumer with up to six months’ worth of instalments. If one does not have an income, the reality is that the consumer’s credit record is in serious jeopardy. In this instance, the consumer can try to sell the car (without buying a new car). One can sell a car to a dealership or to another private individual. Cars basically have two values: a Trade Value and a Retail Value. These are just indicative values and many other factors influence them, such as extras that the car might have, the mileage, the accident history of the car, as well as the service history.
Trade and retail values
In essence, the Trade Value of a car is an indication of what the dealer will offer to buy a car. The dealer must of course make a return when reselling the car; the Retail Value is, therefore, a guide to what the dealer can sell the car for again.
When selling a car to a dealer, one can expect to receive the Trade Value for the car. However, if selling the car privately to another individual, one can consider a sale price more aligned with the Retail Value of the car. However, this is not without risks. Selling the car to a dealer is a very simple process and happens quickly with minimal risk to the seller. Selling the car privately is a lot more difficult, is admin intensive, and is fraught with risks.
