Buying a car is one of the biggest financial decisions most South Africans will ever make. Yet the process, especially the finance side, is designed to be confusing. The monthly instalment gets all the attention, while the real costs hide in the interest rate, the balloon payment, and the stack of value-added products (VAPs) an F&I manager will place in front of you to sign.
Here is the uncomfortable truth: a staggering 70% of vehicle finance applications in South Africa are declined. Most rejections have nothing to do with how much you earn, they’re about what’s in your credit file and whether you walked into the process prepared.
This guide explains everything in plain language, from the mechanics of your credit score to what happens in the F&I office and what your rights are under the National Credit Act (NCA). Read it before you set foot in a showroom.
1. Why So Many South Africans Get Declined for Vehicle Finance
Before a bank will lend you money to buy a car, it runs two separate checks: it looks at your credit profile to judge your past financial behaviour, and it runs an affordability assessment to check whether you can actually manage the repayments on your current income. Both checks must pass. Many buyers assume they’ll be fine because they earn a good salary, but a poor credit history can override income entirely.
The credit score problem
South Africa’s credit bureaus, Experian, TransUnion, and Compuscan, each maintain a record of your credit history. Banks use this record to generate a credit score, typically on a scale of 300 to 850. The higher the number, the more trustworthy you appear as a borrower.
Here is how the scoring bands translate to your chances of vehicle finance approval:
| Credit Score Range | Rating | Finance Approval Chances |
| 750 – 850 | Excellent | Very high — best interest rates |
| 681 – 749 | Good | High — competitive rates available |
| 580 – 680 | Fair / Subprime | Possible — higher interest rates |
| 300 – 579 | Poor | Very unlikely — specialised lenders only |
A score below 580 does not mean the dream is over — it means you need a different strategy, covered in Section 4 of this guide.
The affordability check
Even with a perfect credit score, banks are required by the National Credit Act to verify that you can actually afford the loan. They will look at your gross income, subtract your fixed monthly obligations (bond, personal loans, credit card minimums, clothing accounts, and so on), and calculate what is left over. As a general rule of thumb, all vehicle-related costs, repayment, insurance, fuel, and maintenance should not exceed 20–25% of your gross monthly income.
| Common mistake: forgetting existing commitments Many applicants forget to account for their current vehicle finance deal when applying for a second car, or underestimate the weight that clothing accounts and personal loans carry in the affordability calculation. The bank’s computer counts everything you’ve signed for. |
Other reasons applications get declined
Beyond credit score and affordability, these factors can also cause a rejection:
- Errors on your credit report — incorrect defaults, amounts, or accounts that don’t belong to you
- Judgements or defaults that are still active on your file
- Being under debt review (also called debt counselling)
- Insufficient employment history — most banks want to see at least 3–6 months of stable income
- Applying for a car that is too expensive relative to your income profile
- Multiple recent credit applications — each one leaves an ‘enquiry’ that makes banks nervous
2. How to Improve Your Credit Score Before You Apply
If your credit score is low, the best thing you can do is nothing, which basically means stop taking on new credit and start building a consistent track record of on-time payments. Credit scores are not fixed. They are recalculated monthly and respond to your current behaviour.
Here is a realistic, step-by-step approach:
Step 1: Pull your credit report (for free)
Under the National Credit Act, you are entitled to one free credit report per year from each registered credit bureau. Start with Experian or TransUnion; both have online portals. Request your report and look for:
- Accounts you do not recognise (possible fraud)
- Incorrect default listings or wrong balances
- Accounts showing as open that you have already paid off
If you find errors, you can dispute them directly with the bureau. They are legally obliged to investigate and correct genuine mistakes. This alone can move your score significantly.
Step 2: Clear arrears before anything else
If you have any accounts in arrears, bring them current immediately. An account with a missed payment that is now paid is far less damaging than an account that is still behind. Defaults and judgments can remain on your credit file for up to five years, but actively resolving them limits the ongoing damage.
Step 3: Pay every account on time, every month
Payment history is the single biggest factor in your credit score. Set up debit orders for the minimum payment on every account. Even if you can only afford the minimum right now, never miss a payment, as the damage from a missed payment can take months to undo.
Step 4: Reduce your credit utilisation
Credit utilisation refers to how much of your available credit limit you are using. If your credit card has a R10,000 limit and you consistently carry a R9,500 balance, bureaus see that as a warning sign. Try to keep your utilisation below 30% on revolving credit accounts.
Step 5: Do not apply for new credit in the months before you want vehicle finance
Every time you apply for credit, whether it’s a clothing account, personal loan, or store card, it leaves a ‘hard enquiry’ on your file. Multiple enquiries in a short period suggest financial desperation to lenders. Go quiet on new applications for at least three to six months before applying for vehicle finance.
| How long does it take to improve a credit score? Realistically, consistent positive behaviour can show meaningful improvement in three to six months. Major issues like judgements take longer to resolve, but you can start the recovery immediately. A score that qualifies you for competitive rates typically takes 12–18 months to build from a poor starting point. |
3. Understanding the Finance Options Before You Sign
When your application is approved, the dealership’s F&I (Finance and Insurance) manager will present you with a finance structure. This is the moment where many buyers sign things they don’t fully understand. Here’s what you need to know before that meeting.
Instalment sale (the standard agreement)
In a standard instalment sale, the bank purchases the vehicle on your behalf, and you repay the loan over an agreed term, which is typically 48 to 72 months. Once the final payment is made, you own the car outright. The interest rate is calculated on the outstanding balance, and your monthly payment covers both capital (the car’s value) and interest.
The key variable here is the interest rate — specifically, how far above or below the prime lending rate your deal is structured. South Africa’s prime rate fluctuates with Reserve Bank decisions. A rate of prime plus 2% means you pay 2 percentage points above whatever the current prime rate is.
The balloon payment — what it really means
A balloon payment (sometimes called a residual) is a portion of the loan — typically 20% to 30% of the vehicle’s price — that is set aside and not included in your monthly repayments. This makes your monthly payments lower. But at the end of your loan term, that lump sum is due in full.
Here is a concrete example of how a balloon changes your real costs on a R300,000 vehicle:
| No Balloon | 20% Balloon | |
| Car price | R300,000 | R300,000 |
| Monthly instalment (72 months, 11%) | ~R5,690 | ~R4,900 |
| Lump sum due at month 72 | R0 | R60,000 |
| Total amount paid | ~R409,680 | ~R412,800 + balloon |
| You own the car outright at end? | Yes | Only if you pay the R60,000 |
Note: These figures are illustrative. Rates and terms vary by lender and credit profile.
The balloon lowers your monthly payment, but does not reduce the total interest charged — in fact, interest continues to accrue on the full loan amount throughout the term, meaning you can end up paying more overall. When the balloon is due, you have three options: pay it in cash, refinance it (essentially taking a new loan on the balloon amount), or trade the car in and hope the trade-in value covers or exceeds the balloon.
| The balloon trap to avoid The danger is when the balloon exceeds the car’s trade-in value at the end of the term. This is called being ‘upside down’ on your loan. You owe more than the car is worth. Always ask the F&I manager: what is the projected trade-in value of this vehicle at the end of the term, and how does it compare to my balloon amount? |
Lease agreements and rent-to-own
In a lease agreement, the bank retains ownership of the vehicle throughout the term. You pay for the right to use it. At the end, you can return it, purchase it at a residual value, or upgrade to a newer model. This suits buyers who like driving newer cars every few years without worrying about depreciation.
Rent-to-own arrangements operate outside the National Credit Act, which means they are accessible to buyers who cannot qualify for standard vehicle finance. However, because they carry a higher risk for the provider, monthly payments are substantially higher than equivalent instalment sale agreements.
4. What to Do If Your Application Was Declined
A declined application is not a permanent door closing — it is information. The credit provider is legally required to tell you why they declined your application. Use that information.
Here is a practical response plan based on the most common decline reasons:
- Credit score too low: Follow the improvement steps in Section 2. Revisit the application in three to six months.
- Affordability failure: Look at whether you can reduce existing debt, choose a less expensive vehicle, or provide a larger deposit to lower the financed amount.
- Defaults or judgements on your file: Contact the creditor directly, negotiate a settlement, get it in writing, and have the bureau update your file.
- Under debt review: You cannot take on new credit while under debt review. Completing the process and receiving a clearance certificate is the only path back.
- Incomplete documentation: Re-apply with a full, correct set of documents — ID, driver’s licence, three months of bank statements, three payslips, and proof of residence less than three months old.
Consider a deposit
Even though the National Credit Act does not require a deposit, putting one down changes the dynamics of your application considerably. A deposit reduces the loan amount, improves the loan-to-value ratio (which banks care about deeply), and signals financial discipline. A 10–20% deposit on a R200,000 vehicle — R20,000 to R40,000 — meaningfully improves your approval odds and reduces the interest you’ll pay over the term.
Shop multiple lenders, not just the dealership’s preferred bank
Dealerships have preferred banking partners. That relationship is not necessarily in your interest — it may be in theirs. Under the NCA, the F&I manager is obliged to submit your application to multiple lenders and present you with the best offer. If you feel this is not happening, you can approach WesBank, Absa Vehicle Finance, Standard Bank Vehicle Finance, Nedbank MFC, or FNB Vehicle Finance directly before visiting the dealership. Having a pre-approval in hand puts you in a stronger negotiating position.
5. Surviving the F&I Office: Your Rights and What to Ask
The F&I (Finance and Insurance) manager’s office is where many buyers, even well-prepared ones, spend money they did not intend to spend. The F&I manager is regulated under the FAIS Act and must identify themselves with an agent identity card before consulting with you. They are legally obliged to give you objective, transparent advice — but that does not mean the conversation is designed in your favour.
Value-added products (VAPs): what they are and how to decide
VAPs are the products the F&I manager will add to your finance agreement. These include credit life insurance (mandatory if the bank requires it), comprehensive vehicle insurance, extended warranties, roadside assistance, paint protection plans, tyre and rim warranties, and shortfall cover. Some are genuinely valuable; others are overpriced for what they offer.
Key things to know:
- Credit life insurance is often required by the lender, but you are not required to use their specific provider — you can source your own.
- Comprehensive vehicle insurance is mandatory on financed vehicles, but again, you can use your own insurer. You do not have to buy it through the dealership.
- Shortfall cover is genuinely worth considering. If your car is written off in an accident, your insurer pays market value — which may be less than what you still owe the bank. Shortfall cover bridges that gap.
- Extended warranties, paint protection, and tyre and rim plans vary enormously in value. Ask to see the specific terms and conditions before signing, and check what is actually excluded.
Your non-negotiables: questions to ask before you sign
| Ask the F&I Manager This | Why It Matters |
| What is my approved interest rate — and is that negotiable? | Banks often give a rate range. You can push back. |
| What is the total cost of the loan over the full term? | Monthly instalment hides how much you really pay. |
| If I take the balloon, what are my options when it’s due? | Understand refinance risk before you sign. |
| Which of these VAPs are compulsory vs. optional? | Many add-ons are optional but presented as required. |
| Can I use my own insurer instead of the in-house one? | You have the legal right to choose your own insurer. |
| Your NCA cooling-off right If you signed a credit agreement somewhere other than the dealer’s premises — for example, at your home or office — you have five business days to cancel it without penalty. This right does not apply to agreements signed at the dealership itself. |
Interest rate: the number that matters most
Your interest rate is the single biggest determinant of how much you pay for your car in total. A difference of 2 percentage points on a R300,000 loan over 72 months can mean tens of thousands of rands in additional interest. The rate you are offered is linked to your credit profile — but it is also negotiable, especially if you have a strong credit score or a competing offer from another lender.
Never accept the first rate without asking: ‘Is that the best rate available for my profile?’ The worst the answer can be is yes.
6. Know Your Rights Under the National Credit Act
The National Credit Act No. 34 of 2005 is one of the most comprehensive pieces of consumer credit legislation in Africa. It exists specifically to protect you — the borrower — from reckless lending and predatory practices. Here are the key rights you should know:
- Right to know why you were declined: The credit provider must inform you of the reasons for any credit refusal.
- Right to a free annual credit report: You are entitled to one free credit report per year from each registered bureau.
- Right to dispute inaccurate information: Credit bureaus must investigate and correct errors within a reasonable time.
- Right to an itemised credit agreement: The NCA prohibits hidden fees — the agreement must clearly list every cost, including initiation fees, service fees, interest, and insurance.
- Right to early settlement: You can pay off your vehicle loan at any time without penalty (on agreements under R250,000). On larger agreements, some interest on the settlement may apply.
- Right to debt counselling: If you are over-indebted, you can apply to a registered debt counsellor to restructure your obligations.
- Right to a cooling-off period: As mentioned above, this applies to agreements signed outside the dealership premises.
- Protection against reckless credit: If a lender approved a loan they should not have approved given your circumstances, you can challenge it as ‘reckless credit’ through the National Consumer Tribunal.
7. A Practical Checklist Before You Walk Into a Showroom
Use this checklist to ensure you are fully prepared before beginning the process:
- Pull and review your credit report from at least one bureau (Experian or TransUnion)
- Dispute any errors on your credit file and allow time for resolution
- Calculate your true monthly affordability: gross income minus all fixed obligations
- Decide on a maximum vehicle price — not a maximum monthly payment
- Save a deposit of at least 10% of the vehicle’s value
- Gather your documents: ID, driver’s licence, 3 months bank statements, 3 payslips, proof of residence
- Research the current prime lending rate and what ‘prime plus X%’ means in rand terms
- Consider getting a pre-approval from a bank before visiting the dealership
- Research the total cost of ownership — insurance quotes, fuel consumption, service plan costs
- At the F&I office: read every page before signing. Ask about every VAP. Take your time.
Final Thoughts
Vehicle finance in South Africa does not have to be intimidating — but it does require preparation. The buyers who get the best deals are not necessarily those with the highest salaries. They are the ones who understood their credit profile before they walked in, knew the questions to ask at the F&I desk, and refused to sign anything they did not fully understand.
The National Credit Act gives you significant protection. Use it. And remember: every number in your finance agreement — the interest rate, the balloon, the term, the VAPs — is, to some degree, negotiable. You just have to ask.