Car Repossessions – The process and what to do if faced with repossession.
Whether you use a car to get to work, school or your local Checkers or Pick N Pay, your car is a real necessity. Cars have always been an essential requirement in South Africa where the public transport system is not always accessible for all.
The truth about purchasing a vehicle with banking finance is that the credit provider holds ownership of the vehicle until the financing is repaid in full. Missing payments due to unexpected emergencies or circumstances can lead to the credit provider repossessing the vehicle.
What is vehicle repossession?
When you buy a vehicle on finance you will agree to certain terms and conditions. Signing this agreement for vehicle finance you commit to repaying the financial institution over a certain period, at a specific interest rate. Defaulting on this agreement will allow the credit provider to repossess the vehicle and sell it to recover the outstanding fees due.
Most credit providers will start with the repossession process after the vehicle finance account is in default for 75 to 90 days. When the credit provider comes knocking on your door demanding the repossession of your vehicle, it is beneficial to have the relevant information about the repossession process. This knowledge will help you negotiate the way forward in this very stressful situation.
We have compiled the process below to assist you through this anxious and worrying circumstance.
Contact us today so we may help you safeguard and defend your moveable assets against repossession.
The Repossession process.
Warrant of Execution or Court Order: To repossess your vehicle due to non-payment the credit provider must get a court order first! This is also known as an execution warrant. This execution warrant is in effect an order from the court to inform or instruct you that the credit provider can take possession of your vehicle. Some credit providers will send out collectors to your home or office to offer you the opportunity to surrender the vehicle. It is important to note that these collectors cannot compel you to return your car without a court order.
If you find yourself in this situation you would need to contact us as soon as a collector arrives at your home or office to repossess your vehicle.
Voluntary surrendering: To save on expensive legal fees you may opt to voluntary surrender the vehicle. If you are unable to repay the vehicle you can return the vehicle to the relevant financial institution. They will give you a written estimate of the value of the vehicle and sell it on auction.
There is no guarantee the credit provider will be able to sell your vehicle for the outstanding amount due. You would thus be held liable to settle any shortfall. This shortfall may be repaid over a period of time if the credit provider accepts an acceptable repayment arrangement. If the vehicle gets sold for more than the outstanding amount the credit provider will pay you the difference, though this scenario is rarely the case.
The bank repossessed my vehicle – What happens next?
Your car gets sold on Auction
Once the credit provider has taken your vehicle they will attempt to sell it on auction. Before auctioning the vehicle the credit provider in most instances will offer to sell the vehicle to you at the full outstanding amount due. Should you not be in a position to buy back the vehicle it will get auctioned.
The sale of the vehicle might not cover the full amount owed to the credit provider. You will be liable to repay any shortfall. This shortfall amount can be repaid in monthly instalments only if a suitable payment arrangement is in place and agreed upon by the credit provider. The Shortfall amount in most cases can form part of the debt counselling process.
Refusal of the consumer to repay the shortfall amount
- Should there be a shortfall amount and the consumer refuses to pay, the following options are available to the credit provider:
- The credit provider will get a Court Order or Warrant of Execution against the moveable assets of the consumer. This process involves the seizure of the consumers’ moveable assets. These moveable assets will get auctioned off and the proceeds credited for the outstanding balance due to the credit provider.
- Garnish orders – the credit provider will get a garnish order to debit the consumers' salary with a specific amount until the shortfall amount is repaid in full.
- You will get listed with all the credit bureau as a default payer.
The best interest for a consumer is to prevent repossession
Repossessions are stressful and can turn out to be very costly. You are not guaranteed that your vehicle will get sold for the outstanding amount. You will rarely be able to walk away without incurring extra costs after your vehicle gets repossessed.
It is important to avoid repossessions at all costs. Debt Counselling will protect your assets against repossession. Apply for Debt Counselling as soon as you are unable to make the relevant monthly instalment.
A debt collector or credit provider agent wanting to repossess your vehicle without a court order
Contact a Debt Counsellor as soon as an agent from the credit provider visits you at your workplace or home. Some collection agencies who act on behalf of credit providers might try and mislead consumers into thinking that their vehicle is being repossessed. The debt collector will attempt to get you to sign a voluntary surrender document. If the debt collector hands you a form that is not a court order, it is most likely that the document is an agreement to surrender your vehicle.
Stay calm, polite and refer the matter to your Debt Counsellor as soon as possible. Your Debt Counsellor will tell you what to do and will deal with the Credit provider.
We want to reiterate that it is important not to sign any documentation and refer the matter to your Debt Counsellor.
The problem with most consumers facing this stressful predicament is that they land up suffering emotionally as well, the psychological term for this is “The Ostrich syndrome”. This is best used to describe consumers who are avoiding contact or communication with the credit provider and describes the behaviour where consumers proverbially ‘stick their heads in the sand’ and ignore the problem they get faced with.
Please do not hesitate in contacting us if you are in trouble with paying your creditors.
Disadvantages of getting your vehicle repossessed
- Extra expensive Legal fees
- Unnecessary stress on your family and marriage
- Vehicle getting sold at a public auction
- No guarantee the financial institution will get the market-related price at auction. This will create a shortfall amount
- A default gets listed at the credit bureau, making it difficult to get any vehicle finance again for the first 6 to 12 months after the repossession