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How it effects vehicle purchases You've heard that the New Credit Act has been passed to protect the consumer and that it is working to your advantage. What does all of this mean? We got some clarity about the Act by speaking to specialists in the field of vehicle sales. According to the Managing Executive of Absa Vehicle and Asset Finance, Marcel de Klerk, the National Credit Act promotes fair, transparent and responsible lending practices, and protects the consumer against, amongst others, reckless lending and over-indebtedness. The Act also regulates the reporting of consumer credit information to credit bureaus. The essence of the Act, which was implemented on the 1st of June 2007, is built on disposable income. Before the 1st of June the loan amount was determined by your gross income. Say you earned R10 000 per month, the maximum installment could not exceed up 30% of your gross income, which would have been R3000. When you want to buy a car now, all your expenses is first going to be deducted from your gross income. For example: R10 000 - R3 600 (Tax + UIF + Pension deductions + Medical fund)= R6 400 - R3000 (The bond on your home) = R3400 - R2000 (Other expenses like groceries and social) = R1 400 n the end you are left with R1400 and this is the amount the bank is going to use when they decide if they are going to grant you credit for a new car. The other example is that your expenses could only be R3000, which would leave you with a disposable income of R7000! If you now go to a car dealer, they will be asking a lot more questions about your personal finances, to fill out the credit application. And this is not because the dealer is difficult. According to the New Credit Act, he or she is compelled to do it. Co-owner of N & N Motors, Nicky Lombard, insists that you make sure the dealer who's helping you, has completed the exam about the NCA which car dealers had to write in May. He says if a car dealer has been declared competent by the exam, he or she will be able to assist you to make an informed decision. According to both Henri and Nicky, the process of buying a car has been slowed down a bit. In the past you could have finished the transaction during your lunch break. Now you need more time to work through the contract, as every time you apply for credit, you will be seen as a new client, which means all your expenses will be checked with every application before you get a complete contract. Nicky advises that you work thoroughly through every contract before you sign it, so that you can make sure what you're signing. This system has been put in place to make sure no reckless credit is granted, but the process may take up to two days. After going through this whole process, you may be thinking, Is the National Credit Act really to the advantage of the consumer? The answer is a unanimous Yes! According to WesBank the NCA offers protection against over-indebtedness and exposure to unscrupulous lenders. In short, it stops you from borrowing money which you will not be able to pay back! Another advantage which Henri and Nicky focused on is the fact that legally you no longer have to pay a deposit, and that the maximum payment periods like the one of 54 months, have fallen away. This however, does not mean that a bank may not enforce a deposit or maximum payment period. So again, check your contract before signing! For car dealers this is also an advantage, because this may enable them to sell vehicles to a bigger segment of the market. Henri feels the NCA may also be to the advantage of the second hand car dealer, because if a consumer is not able to afford a brand new vehicle, they can fall back on the second hand market to look for something in their price range. If you are married or sharing a house with a friend, both of your disposable incomes may be taken into account when the bank decides whether to grant you credit or not. This enlarges your advantages of being granted credit. Henri and Nicky feel that the practice and the theory of the NCA are not yet in balance. Some of the processes are not in place yet, and sometimes this slows the process down. Change is hard to get used to, like with all things in life, but in six months' time we will looking back on this new legislation and think, what was all the havoc about? Remember, if your application for credit has failed, you may request a detailed description as to why from the bank. Seeing as all the details of credit you already have are kept at a central point (for example the credit bureau) it will be easy for any credit provider to access that information. Should you not be granted credit because you are already over-indebted, do not break out in a cold sweat! Help is available. WesBank advises that you contact the New Credit Regulator, a newly established facility, which makes debt counseling available to customers who need it. They can be contacted at 0860 627 627. They can also provide you with education concerning the NCA, research, policy development, registration of industry participants and investigations into your complaints. To get more information on this, visit their website at ww.nca.org.za. Your local WesBank or Absa office will also be able to assist you with questions concerning indebtedness. Here is an idea of the documentation you will need to take with you if you apply for credit when you want to buy a new car. Take the documents along to the dealer, as it will speed up the process:
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