NCR - Penalties for settling early?

PilgrimToHyperion

PilgrimToHyperion

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Today I went to Hyundai to have a look at the Elantra. Nice piece of car, but a tad expensive (238k for the 1.8 manual). Anyhoo, the sales lady who was really helpful, explained to me that she recommends financing cars at this price range over 72 months, because if the price is less than 250k, no penalties are apparently payable should you choose to settle early.

Apparently this is is law (NCR). I tried to Google it, but alas, Google seems stumped. :wtf:

Why I'm asking is because we get quite nice yearly bonuses and I'd like to perhaps finance the car over 72 months and then pay it off earlier as I get extra cash. On the other hand, 2 years worth of extra interest? Sjoe!

What do you guys think?
 
She's 100% correct; no early-settlement penalties for credit agreements below R250k.

*edit*

Oh, and it's NCA as in National Credit Act...
 
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I would say fork out more and pay over 5 years. You will get more if you want to sell it again.
 
I'd ask for confirmation from a more senior management person in writing that you can settle early.
 
Paul Hjul said:
I'd ask for confirmation from a more senior management person in writing that you can settle early.
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Why would you say this after the correct information has already been supplied? There is no need to 'ask for confirmation from a more senior management person in writing' as it is a stipulation of the very legislation governing credit agreements. Here's an excerpt from the National Credit Regulator's guide on the NCA:

No penalty fee is payable for the early settlement of a small or
intermediate agreement. If the consumer wants to terminate a large
credit agreement i.e. a credit agreement which is greater than R250 000
(two hundred and fifty thousand rand) or a mortgage agreement, the
settlement amount may include an early settlement charge which is not
allowed to be more than three months interest, and less if the consumer
provides notice of his / her intention to settle early. In the case of a notice
given by the consumer it will reduce the three month interest early
settlement charge by the notice period
Click to expand...
 
Sorry, but what does it matter whether you finance it over 72 months, or 48 months? ie. why does she recommend a longer payback time?

From what others have posted, the factor here is the cost of the vehicle. And if the vehicle is less than R250k, no matter how long your repayment period, there are no penalties.

What am I misunderstanding?
 
GarethC said:
Sorry, but what does it matter whether you finance it over 72 months, or 48 months? ie. why does she recommend a longer payback time?

From what others have posted, the factor here is the cost of the vehicle. And if the vehicle is less than R250k, no matter how long your repayment period, there are no penalties.

What am I misunderstanding?
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MKFrost said:
Same here, penalties are based on amount and not finance period..... unless the total finance amount goes over R250k if period is extended????
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I would assume it'd be a somewhat poorly informed bit of advice purely in the interest of lowering the monthly repayments. That's all well & good, but it does of course mean that one would pay a fair bit more in interest over the period.
 
*Bump

I was told that they would be able to negotiate a better interest rate @ 72 months. But I would be able to settle it at any stage (planning to do so after 36 months).

Any catches that I should be aware of?

/total is less then 160k
 
I took my car out on the longest possible terms last year, 6 years with no deposit and NO RESIDUAL. My original plan was to increase my payment by 10% each year (you just phone your motor vehicle credit company to do this).

Have not done it as I bought my first house instead this year but I have a car payment I can afford and did not prevent me from buying my house (affordability requirement).
 
Park@82 said:
I was told that they would be able to negotiate a better interest rate @ 72 months. But I would be able to settle it at any stage (planning to do so after 36 months).

Any catches that I should be aware of?

/total is less then 160k
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There shouldn't be any snags - I've just advised a client to do exactly that - take it over 72 and your repayments will be reduced, and settle early - no problem. :)
 
Fazda said:
There shouldn't be any snags - I've just advised a client to do exactly that - take it over 72 and your repayments will be reduced, and settle early - no problem. :)
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Thanks Fazda, any advice on what would be the best way to settle it earlier?

I am taking it with a small deposit (hopefully this helps to get a better rate) but I do have another 40k available. I am not sure if I should dump that into the account after the sale and what effect it would have (admin/transaction costs etc). Or if I should just ad an extra amount (R1100) to my monthly payment.
 
Park@82 said:
Thanks Fazda, any advice on what would be the best way to settle it earlier?

I am taking it with a small deposit (hopefully this helps to get a better rate) but I do have another 40k available. I am not sure if I should dump that into the account after the sale and what effect it would have (admin/transaction costs etc). Or if I should just ad an extra amount (R1100) to my monthly payment.
Click to expand...

Dump it all in as soon as the account is open. You'll save maximal interest this way
 
Bump.

Ok so looking to finance a medium amount (R80,000) on a car due to some savings being tied up at the moment. I have no idea when it comes to car finance since everything has previously been cash. My question is, does car finance work the same way a bond does in that I can pay in extra every month and have it come off the capital amount?

So if monthly repayments are say R4,000, can I pop an extra R2,000 to R3,000 in every month and pay things off early, rather than full on early settlement?
 
TehStranger said:
Bump.

Ok so looking to finance a medium amount (R80,000) on a car due to some savings being tied up at the moment. I have no idea when it comes to car finance since everything has previously been cash. My question is, does car finance work the same way a bond does in that I can pay in extra every month and have it come off the capital amount?

So if monthly repayments are say R4,000, can I pop an extra R2,000 to R3,000 in every month and pay things off early, rather than full on early settlement?
Click to expand...

Yep, just notify the bank that you want to reduce the capital, and keep an eye on your monthly statements.

Also, no penalties for settling anything below R250k early, over that you need to give 3 months' notice of your intent to avoid penalties.
 
HapticSimian said:
Yep, just notify the bank that you want to reduce the capital, and keep an eye on your monthly statements.

Also, no penalties for settling anything below R250k early, over that you need to give 3 months' notice of your intent to avoid penalties.
Click to expand...

Thank you kindly, this is what I wanted to hear. :)
 
Beylie said:
Thanks a mill for the feedback guys. No wonder Google was stumped NCR <> NCA! :D
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Actually you weren't far off and a Google search turns up www.ncr.org.za as the first result so I'm not sure why you didn't find anything.
If you click on the Act menu you can download the NCA (National Credit Act) as well as other documentation.

The National Credit Regulator (NCR) was established as the regulator under the National Credit Act 34 of 2005 (the Act) and is responsible for the regulation of the South African credit industry. It is tasked with carrying out education, research, policy development, registration of industry participants, investigation of complaints, and ensuring enforcement of the Act.
 
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