What you need to know:
Where before you could get a vehicle loan (bank approval dependent) with various options, the new Namibia Credit Agreement Act has stricter requirements for anyone wanting to finance a new set of wheels.
Why, Larry, why?
In essence, the act was made to protect consumers who may have overstretched their finances to buy a car. At the same time, it also protects the motor retail industry and banks.
10% deposit, 54 months
The new act dictates that any finance application requires (at least) a 10% deposit and a contract period no longer than 54 months.
So what’s changed?
Before the act came along, some companies would offer loans with no deposit and/or longer contract periods (like 60 or even 72 months). This is not allowed anymore.
Yes! RV’s (residual values) or balloon payments are also on the naughty list from now on.
Will this affect my current car loan?
No, but do confirm that with your financial institution. All new applications would be subject to the new rules.
Are these terms fixed?
Some institutions may allow bigger deposits (above 10%) or a shorter period (less than 54 months).
What about interest rate?
Speak to your bank or the financial manager about the prevailing interest rate, what deals they offer and if you may choose a fixed or linked interest rate.
Who benefits from this?
Mostly you, the consumer. Instead of paying too little for a car you cannot afford (and possibly getting a very nasty surprise in the future) this new act encourages people to save up longer and buy cars they can afford.
A negative outcome will be reduced (non-cash) sales of vehicles.
Positive side effects include fewer repossessions and a used car upswing.
The vehicle’s cash price, let’s assume N$ 300,000
Part of the purchase price you pay upfront, now at least 10% = N$ 30,000
The prime lending rate in percent – e.g. 10.75%
RV / Balloon
A future payment option which is not allowed.
Number of instalments (months) you have to pay. Now set at a maximum term of 54.