What happens when you miss a car finance payment in South Africa?

Missing a car payment doesn’t just trigger extra admin and financial penalties, including possible eventual blacklisting. There are other repercussions and none are particularly pleasant prospects, which is why it’s best to avoid them.

Sometimes it’s the need to buy Christmas presents. Sometimes it’s an unplanned (and expensive) life event. And other times it’s the combined tsunami effect of all outstanding debt. There may well come a time when there aren’t sufficient funds in your account to cover your monthly vehicle-finance payment.

Do you ignorantly hope things will carry on as if nothing happened, or do you panic because you know you’ve set off a chain of events that, if left unaddressed, will adversely affect your financial future?

Although it’s unwise to run from creditors, knowledge about what happens when you miss a payment might empower you to understand the early steps you can take to rectify your actions. 

The bounced debit order: Early arrears in payment

The good news about a bounced debit order is that it doesn’t immediately set off a Grand Theft Auto 5-star Wanted level that will see armed helicopters swarming and SWAT teams storming your house. The bad news is that the reprieve is only temporary – apart from a penalty fee, you must still pay the outstanding amount for the missed month, along with extra interest on the arrears balance.

It’s advisable to ensure your phone’s battery is charged, because during this period you’ll be receiving a ton of texts, emails and calls from the bank in varying degrees of friendliness, reminding you of your outstanding commitment.

Do not ignore these calls. You may be able to proactively negotiate a voluntary payment arrangement and avoid legal action.     

Do note, however, that the delayed payment of a debit order rolling over into the next month does not cancel that month’s regular instalment. So, if you settle the previous one late without paying that month’s instalment on time, you’re only locking yourself into a cycle of double-debt but never quite breaking even.

A missed payment can eventually affect your credit record, but it is not automatically reported as adverse information after 30 days. NCA regulations provide specific notice requirements, and adverse consumer credit information generally cannot be submitted until the required minimum payments have remained unpaid for at least three consecutive billing cycles.

Regardless, a negative credit record can make future credit harder to obtain and more expensive.

Section 129 Notice of Default: The critical legal threshold

If the default persists, the creditor can issue a Section 129 notice formally advising you of options to resolve the situation, including debt counselling. Under Section 130 of the National Credit Act (NCA), however, it cannot approach a court to enforce the agreement until you have been in default for at least 20 business days and the other statutory requirements have been met.

The creditor must allow at least 10 business days to lapse after delivery of the Section 129 notice before approaching the court, subject to the other requirements of Section 130.

Court summons, judgement and repossession

You are now very close to – or even at – the point of no return. With a judgment against you, the creditor has obtained a court order enforcing the agreement. For a financed vehicle, that could result in repossession.

Once the creditor has obtained the necessary court order, the vehicle can be attached and sold through the execution process, normally involving the Sheriff.

The Sheriff can demand payment and, failing to receive it, can attach the property.

If the creditor or its agent attempts to repossess the vehicle without the consumer’s consent and without following the applicable legal process, the repossession may be unlawful.

Voluntary surrender vs. debt review: How to protect yourself

If by now you suffer a panic attack every time your phone beeps, you still have some relief levers to pull.

Section 127 provides a formal avenue for voluntary surrender, which can avoid the need for a court-enforced attachment process, although surrender does not eliminate the consumer’s liability for any resulting shortfall or other permitted costs.

If the vehicle sells for less than the settlement amount, you remain liable for the shortfall. And you are now without a car which, for most people, is not a desirable outcome.

What, then, are your other options?

A far better avenue is to take up debt counselling. Applying for debt review before enforcement proceedings can provide important protection against further enforcement, although the effect depends on the stage the credit agreement has reached.  

If you think you’ll get a better price than what the car would fetch at an auction, you can also sell it privately. When this happens, the finance provider will normally require the outstanding settlement amount to be paid before releasing its title deed and the documentation needed to complete the change of ownership. If the sale price is insufficient to settle the finance, you remain liable for the shortfall unless the lender agrees otherwise.

At the best of times, missing vehicle payments is not a situation any car buyer willingly wants to get into. Sometimes it’s inevitable, though.

As the odds are stacked against buyers the moment the process kicks off, knowing what to expect next becomes paramount for sound financial decision-making under pressure. It’s all about mitigating impact and preserving long-term feasibility when you’re down, but not out.