Requirements for Getting Finance to Buy a Used Car in South Africa
One of the problems people face when responding to ads of cars for sale, especially used cars, is how to get finance quick without losing the opportunity to buy the second-hand car because of time delay. Fortunately, when going through vehicle sale facilitators or dealerships such as RFS Auto, vehicle financing applications can be done on the spot. In this way, the buyer does not have to contact bank after bank in the hope of getting finance.
First-time buyers responding to cars-for-sale ads at dealerships often don’t realise that having their paperwork in order can expedite the process and improve the chances of being approved for vehicle finance. We thus provide basic guidance below regarding documents and restrictions related to financing of used cars in South Africa to help minimise the risk of responding to an ad for a car for sale, just to realise you don’t qualify for the amount requested.
Who can Get finance?
The National Credit Act is strict when it comes to credit agreements and no bank or financial service provider is allowed to extend credit to a person under debt review or debt counselling. A valid South African driver’s license is compulsory. The vehicle is financed and as such it technically still belongs to the financial service provider until paid in full. Banks don’t provide vehicle finance to people overexposed to debt, as this constitutes reckless lending.
A person must earn a minimum salary of R6000 per month to qualify for vehicle finance as the monthly repayments must be affordable and leave the debtor with enough disposable income to pay for other living expenses. Note that when the bank determines the affordability of repayments, they also consider monthly fuel and maintenance costs.
To qualify for vehicle finance, whether for a used or new car you must thus:
- earn R6000 or more per month;
- have a valid SA driver’s license;
- not be under debt review or debt counselling; and
- not be overexposed to debt.
Keep in mind that banks don’t generally finance used cars that are older than 10 years, though there are banks that will consider vehicles as old as 20 years. The vehicle to be financed may not be one that was rebuilt after a major accident if the insurance company wrote it off. You cannot obtain finance for a vehicle classified as recovered or stolen and that is why it is advisable to only respond to ads related to cars for sale from reputable service providers.
The bank also looks at the cash price of the car. The price must be market-related and thus not more than the retail value for the particular type of vehicle, make, model, year of manufacturing, and the condition of body and mechanical components of a similar vehicle from the same manufacturer, model, make, and year of manufacturing. With a used car, the bank will also need details regarding the odometer reading. Note that vehicles with service histories are more likely to be financed than those with none.
You will thus need the following documents to obtain vehicle finance for a used car:
- Copy of your ID.
- Copy of your driver’s license.
- Proof of income, which can include bank statements and your salary slips.
- Roadworthy certificate (when buying the vehicle from a private seller).
- Vehicle registration papers.
- Sale agreement.
- Proof of residence, such as utilities account.
You will often see cars for sale without papers. Don’t buy it, because you don’t know whether the car has been stolen. The banks will not consider financing cars without papers. If you are an expat, you will need a valid passport with a permanent visa stamp in the document. You must have a driver’s license. This may be a foreign driver’s license and doesn’t need to be an international one, as long as the license has been issued in one of the eleven official languages of South Africa.
Note that the buyer gets full possession of the car once paid for, but only gains title ownership with registration of the vehicle in their name. Buying a used car thus means having to register the vehicle in your name as soon as possible. This is another benefit to consider for buying one of the cars for sale through RFS Auto. The tedious footwork has been done and we assist with registration of the vehicle in your name. Rather buy cars for sale from dealerships and service providers such as RFS Auto if you need to finance the purchase than trying to get finance for a used car sold privately.