Ending vehicle finance agreements early

If your car requirements change during your finance contract, you aren’t forced to wait until your finance period is finished before you can upgrade – or downgrade. But, as with most things related to finance, you need to make sure you’ve done your homework before you make a decision.

Settling early

When you sign a legally binding contract with a credit provider, you are obligated to pay back what you owe. You can’t simply cancel your debt by cancelling your contract.

That doesn’t mean you can’t end your vehicle finance agreement early if your circumstances change or you need a larger car for your growing family. But you will need to settle the account, i.e. pay off the rest of what you owe. To find out how much you’ll need to pay, you need to ask your credit provider for a settlement quote.

You may find that the settlement quote includes a penalty, but the credit provider is not allowed to charge more than three months interest – and it could be less if you give notice of your intention to settle early. If your finance agreement is less than R250,000 then you shouldn’t be charged a penalty at all.

Timing is everything

If you want to settle the balance on your car early, it’s critical to check that your account has reached its break-even point. That’s when you’ve paid off enough of your debt that the amount you still owe is roughly what the car is worth if you sell it. If you try to sell the car before you get there, you probably won’t get enough money to cover your settlement amount.

All yours now!

While your vehicle is under finance, your credit provider is registered as the titleholder and you are registered as the owner. When you have finished paying off your car, you will become both the titleholder and the owner. You’ll need to request your original NaTIS (registration) document from your credit provider and go to your local vehicle licensing authority within 21 days to have the titleholder changed to your name.

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