The National Credit Act and Vehicle Finance
We have all hopefully heard of the National Credit Act (NCA)? One often hears people talking about HP’s implying that buying a vehicle on “credit” would be on an HP agreement. This is somewhat out of date as the HP Act was replaced by The Credit Agreements Act (+/- March 1982) and this has now again been “updated and replaced by the National Credit Act. Simply stated; this Act is specifically designed TO PROTECT the customer should credit facilities be availed of. This act (NCA) governs the vehicle financing process.
But what does this mean to the man in the street that has decided to buy a new vehicle? The motoring consumers out there can now experience increased affordability and more security in their vehicle finance agreements under the new National Credit Act.
This Act came into effect on 01 June 2007, and has replaced the previous Credit Agreements Act and the Usury Act. The main objective or purpose of the Act is for the promotion and advancement of the social economic welfare of all South Africans by:
- Combating over-indebtedness of consumers
- Endorsing a fair and transparent credit market
- Consumer education and protection
- The Encouraging of a competitive and responsible credit market
- Encouragement of an accessible, non discriminatory and efficient credit market
Who does the Act apply to?
The NCA applies to all credit agreements and this includes the following:
- Credit facilities
- Credit transactions
- Installment agreements
- Financial leases
- Home loansThe NCA has been designed to protect Natural Persons (people like you and me) but not Juristic Persons (Companies, CC’s, Clubs, Associations, etc). However, if a Juristic has an asset value or a combined annual turnover of R1 000 000.00 or less enters into a credit agreement, they will be covered by the NCA. i.e. treated exactly the same as if they were the “man in the street”.
Like in most laws there are limitations and exclusions pertaining to amount of the loan or possible use of the asset being financed but these will be explained or discussed at point of sale by one of our registered and qualified Representatives all of whom are registered with the Financial Services Board.
Must I still pay a deposit under the NCA?
One must immediately be careful here to differentiate between the NCA implications and Bank Policy. The NCA has done away with minimum deposits – there is no longer the legal requirement of a 10% or 20% deposit BUT this does not mean that everyone will be able to enter into a credit agreement without a deposit. All finance applications are subject to a bank credit assessment and the structure of the contract will depend on the consumers risk profile. In other words, the Bank may well approve the transaction but on condition that you pay a deposit i.e. they do not want a 100% exposure or possibly they feel you are only good for 80% of the loan re affordability. Yes, this could be negotiated but the point is that the Bank have the final say re “size” of the advance.
What documentation is required when applying for finance?
- Bar Coded South African ID Document
- Valid applicable Drivers License
- Proof of Residence (not older than 3 months)
- Latest Payslip (not older than 3 months)
- Sometimes Banks do ask for bank statements to support earnings especially where commission, incentives and bonuses may be involved.
- Company Registration Documents
- Latest Audited Financial Statements (signed)
- Up to date Management Accounts (signed)
- Last 4 months Business Bank Statements
Where should I apply for vehicle financing at the Dealership?
Every Dealership in the Eastern Cape Motors Group has a dedicated and duly authorized Business Manager (Representative) as required by the National Credit Act and the FAIS and FICA. The Business Manger will be able to assist you with your new vehicle finance application and any questions that you might have regarding the purchase of your new vehicle. They will submit your application to the Finance House of your choice and negotiate you the best possible deal.
Please find the contact details of the Eastern Cape Motors Franchise of your choice HERE.