Vehicle instalments driving you to despair

According to the Experian Consumer Default Index (CDI) more and more South African households are under increasing financial strain.

The CDI tracks the financial behaviour of 14.2 million consumers with 17.9 million active credit cards, personal loans, vehicle finance and/or home loans with a value of approximately R1.57 trillion in outstanding debt.

According to their statistics the rate of first-time credit defaults has escalated significantly since January 2018.

A significant portion of this rise was caused by increasing defaults in the vehicle finance sector – which begs the question: “Is it worth driving a luxury car by day, but having the instalment haunt you at night?”

The hike in VAT as well as the constant petrol price increases are surely not helping the situation either, as it negatively impacts the disposable household income and cash flow of consumers.

According to David Coleman, chief data officer at Experian SA, the default in vehicle loans also has a direct impact on consumers who are taking on more credit in order to fund their everyday expenses.

In light of the above, it is abundantly clear that big “desire-purchases” such as buying a new car can have serious repercussions on your budget. Re-evaluate whether you need a vehicle or if you want a new vehicle. There is also a huge difference between “I truly need a new/my own vehicle” and “I am buying the newest/fastest/biggest vehicle on the market.”

Take the following steps when you have evaluated your situation and have come to the conclusion that you need a new vehicle:

  1. 1. Decide on a vehicle that addresses your needs and your budget;
  2. 2. Consider a second-hand vehicle;
  3. 3. Do not buy the most expensive car that you can afford – leave “wiggle-room” for interest hikes or further fuel price increases;
  4. 4. Hang on and accumulate a deposit to reduce your monthly repayments;
  5. 5. Don’t delay your problems by choosing a (large) balloon payment.

Don’t let vehicle payments drive you to despair. You can take preventative measures before buying a new car. Even if you are currently caught up in a difficult situation with your monthly car repayments, perhaps you could look for a more economical solution: one that won’t strain your pocket and would still be a sweet ride!

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