Best Car Loan lenders in South Africa for 2025
- Written by Wesley Vos
- Updated
Car Loans
Capitec: BEST for Flexible loan terms
Annual Interest (APR)
9-17%
Loan Amount
Up to R500k
Loan Term
Up to 7 yrs
Apply on partner site
Pros & cons
Pros
- The highest customer satisfaction rate in South Africa with 82.2 points out of 100
- Potentially the lowest interest rates dependent on your credit score
- Repayment terms up to 7 years
- Simple online application
- Committed to clarity and transparency
- Fixed monthly instalments
Cons
- There is room for improvement in the turnaround time for resolving customer queries
- Loan approval times can sometimes be slower than desired
- Capitec Bank's loan offerings are less diverse, limiting options for borrowers needing specialized products
Our take
Overview
Capitec Bank, founded in 2001, has grown to become one of South Africa’s largest and most innovative financial institutions. Known for its simplified banking solutions, Capitec focuses on making personal banking easier and more accessible for everyday South Africans. The bank provides a range of credit products, including unsecured personal loans and vehicle finance. Its vehicle loans are designed to provide flexible options for buying both new and used vehicles, making it easier for individuals to afford car ownership.
Capitec offers vehicle loans up to R500,000, with repayment terms of up to 84 months. The standout feature of Capitec’s car loan is that it is unsecured, meaning you own the vehicle from day one without the need for collateral. Customers can apply online through Capitec’s partner websites, streamlining the application process for added convenience. With competitive interest rates starting from the prime lending rate, Capitec continues to position itself as a customer-focused bank, providing accessible financial products for a broad range of South Africans.
Key Facts
- Unsecured Loan Option: Capitec offers unsecured vehicle loans, meaning you own the vehicle outright from the day you purchase it. This provides you with full ownership and flexibility from the start.
- Competitive Interest Rates: The interest rates for Capitec vehicle loans start from the prime rate, making them a competitive option compared to other lenders in the market. This can help lower your total interest costs over the loan term.
- Flexible Loan Amounts and Terms: You can borrow up to R500,000 with repayment terms ranging from 1 to 84 months, allowing you to choose a plan that best fits your financial situation and needs.
- Simple Online Application Process: The entire loan application can be completed online, making it quick and easy to apply. This convenience is especially beneficial for tech-savvy customers who prefer a digital-first approach.
- No Early Repayment Penalties: Capitec allows you to repay your vehicle loan early without incurring penalties, enabling you to save on interest costs if you can pay off the loan sooner than planned.
Known qualification & document requirements
- You must be 18 years or older and have a clear copy of your ID document
- Be a South African citizen or foreign national with permanent residency
- Proof of income in the form of 3 months’ bank statements & payslips
- Have a valid driving license
- Proof of residence (not older than 3 months)
Fees
Initiation fee: R1207.50 once off
Monthly admin fee: R69
Time to receive funds
24-72 after application approval
Illustrative Example
Loan Amount: R100,000-00
Repayment Terms: 60 months
Annual Interest Rate: 12% (dependent on your credit rating)
Monthly Instalment: R2,224.44
Total Cost of Credit: R33,466-69 (interest)
Total Repayment: R133,466-69
*Please note this is just an illustrative example of what it would cost you. Your rate and initiation fee will be determined according to your personal risk profile. To get an accurate quote we recommend getting a quote from Capitec.
Car Loans
Wesbank: BEST for one-stop car services
Annual Interest (APR)
9-17%
Loan Amount
R30k plus
Loan Term
2-8 yrs
Apply on partner site
Pros & cons
Pros
- Competitive rates
- Fixed monthly repayment rate
- Repayment term up to 8 years
- Simple online application
- Extensive guidance to help customers make informed decisions
- Wshop purchases can be added to the financing contract
- Their car finance calculator helps to see your affordability
Cons
- Some clients have reported longer processing times, especially during peak periods
- While customer service is generally strong, experiences can vary, with some reports of delays or less satisfactory interactions
Our take
Overview
WesBank, founded in 1969, is a leading provider of vehicle finance solutions in South Africa. As part of the FirstRand Group, WesBank has established itself as a trusted name in car financing over its five decades of operation. WesBank offers a variety of finance options tailored to both individuals and businesses, ranging from traditional car loans to structured lease agreements. Their focus is on delivering flexible, customer-centric solutions that cater to a wide range of vehicle financing needs, whether it’s for new, pre-owned, or even privately sold cars.
WesBank’s competitive advantage lies in its transparent approach, ensuring customers understand the terms of their financing agreement. The company offers a streamlined online application process, allowing customers to apply for vehicle loans easily and track their progress. WesBank also provides a range of digital tools, such as repayment calculators and account management services, to enhance the customer experience. With competitive interest rates based on the applicant’s credit profile and a commitment to customer service, WesBank remains a top choice for car loans in South Africa.
Key Facts
- Flexible Loan Amounts and Terms: WesBank offers car loans starting from R30,000 with flexible repayment terms ranging from 24 to 96 months, allowing you to choose a term that fits your budget and financial situation.
- Competitive Interest Rates: WesBank provides competitive interest rates based on your credit profile, ensuring that you get a fair deal depending on your financial standing.
- Wide Range of Financing Options: WesBank caters to diverse needs by offering various financing solutions, including traditional car loans, lease agreements, and structured payment plans. This flexibility helps you choose a financing option that aligns with your personal or business requirements.
- Comprehensive Insurance Solutions: In addition to vehicle financing, WesBank offers a range of insurance products, ensuring your investment is protected. This all-in-one service simplifies the car-buying process by allowing you to manage both finance and insurance under one roof
- User-Friendly Online Platform: WesBank’s digital tools enhance customer experience by offering an easy online application process and a mobile app that allows you to manage your loan, check your application status, and access important documents anytime, anywhere.
- Loan Approval and Management Support: WesBank provides a streamlined loan approval process with quick responses. They also offer extensive customer support to assist you throughout the financing journey, from application to loan management.
- The WesBank Vehicle Finance calculator is user-friendly and quickly provides information on what car you can afford.
Known qualification & document requirements
- You must be 18 years or older and have a clear copy of your ID document
- Be a South African citizen or foreign national with permanent residency
- Monthly income of at least R7 500
- Proof of income in the form of 3 months’ bank statements & payslips
- Have a valid driving license
- Proof of residence (not older than 3 months)
Fees
Initiation fee: R1207.50 once off
Monthly admin fee: R69
Time to receive funds
24-72 after application approval
Illustrative Example
Loan Amount: R100,000-00
Repayment Terms: 72 months
Annual Interest Rate: 11.5% (dependent on your credit rating)
Monthly Instalment: R2,021.41
Total Cost of Credit: R39,366-00 (interest)
Total Repayment: R145,541.50
*Please note this is just an illustrative example of what it would cost you. Your rate and initiation fee will be determined according to your personal risk profile. To get an accurate quote we recommend getting a quote from WesBank.
Car Loans
Absa Bank: BEST for Competitive Rates
Annual Interest (APR)
Personalised
Loan Amount
R10k Plus
Loan Term
2-6 yrs
Apply on partner site
Pros & cons
Pros
- Absa offers a simplified application process online, via app, or in-branch
- You can choose between a fixed or variable interest rate
- Absa's Credit Protection Plan covers death, disability, or illness, protecting your family from debt
- Their "Activate" vehicle insurance offering makes purchasing your vehicle faster and easier
- Receive up to 40% cashback, plus an additional 10% based on their driving performance
- Flexible terms of up to 6 years
- Their car finance calculator helps to see your affordability
Cons
- Some customers perceive Absa's interest rates and fees as higher than those of other banks
- Some reviews report delays in loan application responses and customer service inquiries
- Some customers report communication difficulties, especially with updates on loan applications or term changes
Our take
Overview
Absa is one of South Africa’s largest financial institutions, offering a wide range of financial products, including vehicle finance options for both new and used cars. Their car loan offerings are designed to cater to a variety of customers, whether you are looking for a new or pre-owned vehicle, with flexible repayment terms and competitive interest rates. Absa’s vehicle finance solution allows you to either choose a fixed or variable interest rate and offers repayment terms ranging from 24 to 72 months. One of their standout features is the ability to opt for a balloon payment or deposit to reduce your monthly instalments, making the loan more affordable for buyers with tight budgets. The bank also provides additional services like car insurance and credit protection plans to ensure customers are fully covered throughout their car ownership journey.
In addition to its vehicle finance solutions, Absa is known for its accessible and customer-friendly loan application process, which can be completed online. They also offer tools like a car loan calculator, which helps customers estimate their repayments based on different loan amounts and terms. Absa’s reputation in the South African market is strengthened by its commitment to providing transparent and flexible financial solutions, with a significant emphasis on customer convenience and satisfaction.
Key Facts
- Flexible Repayment Terms: Absa offers flexible repayment terms ranging from 24 to 72 months, allowing you to choose a period that suits your budget and financial planning needs.
- Fixed or Variable Interest Rates: You can choose between fixed or variable interest rates, providing the flexibility to either have stable, predictable payments or potentially lower repayments depending on market conditions.
- Balloon Payment Options: Absa allows you to reduce your monthly repayments by opting for a balloon payment at the end of your loan term, which is particularly useful for lowering initial costs.
- Comprehensive Insurance Options: Absa provides various insurance options, including credit protection plans and extended cover, to protect you in cases of death, disability, or job loss, ensuring peace of mind throughout the loan term.
- Easy Online Application: The application process is straightforward and can be completed online, in-branch, or via the Absa banking app, making it convenient to apply for vehicle finance from anywhere.
- Pre-Approval and Quick Disbursement: Absa offers a quick pre-approval process, enabling you to know your borrowing power before shopping for a car, ensuring a smoother and faster purchase experience.
- To find out what loan amount you can afford, use the Absa Vehicle Finance Calculator.
Known qualification & document requirements
- You must be 18 years or older and have a clear copy of your ID document
- Be a South African citizen or foreign national with permanent residency
- Monthly income of at least R7 500
- Proof of income in the form of 3 months’ bank statements & payslips
- Have a valid driving license
- Proof of residence (not older than 3 months)
Fees
Initiation fee: R1207.50 once off
Monthly admin fee: R69
Time to receive funds
24-72 after application approval
Illustrative Example
Loan Amount: R100,000-00
Repayment Terms: 72 months
Annual Interest Rate: 11.5% (dependent on your credit rating)
Monthly Instalment: R2,021.41
Total Cost of Credit: R39,366-00 (interest)
Total Repayment: R145,541.50
*Please note this is just an illustrative example of what it would cost you. Your rate and initiation fee will be determined according to your personal risk profile. To get an accurate quote we recommend getting a quote from Absa.
Car Loans
MFC by Nedbank: BEST for customer support and service
Annual Interest (APR)
Personalised
Loan Amount
R50k Plus
Loan Term
1-8 yrs
Apply on partner site
Pros & cons
Pros
- MFC offers competitive rates and transparent fees, ensuring a predictable borrowing experience
- Loans are tailored to your budget, but longer terms may increase total interest costs.
- Repayment term up to 8 years
- Simple online application
- MFC offers two different interest rate options
- Early settlement options available
- They offer vehicle insurance, which can help make the purchase of your vehicle easier and faster.
- Their car finance calculator helps to see your affordability
Cons
- MFC requires loan protection insurance, which adds to your loan's overall cost
- Some customers feel MFC (Nedbank) lacks the personal touch smaller banks offer
- While some praise their customer service, others have had unsatisfactory experiences.
Our take
Overview
MFC, a division of Nedbank, has become a leading vehicle finance provider in South Africa since its formation in 2010 through a merger with Nedbank Vehicle and Asset Finance. With its single-minded focus on vehicle financing, MFC stands out by offering tailored finance solutions for both new and used vehicles, as well as private sales. Backed by one of the country’s most reputable banks, MFC provides customers with the security and trust associated with Nedbank, making it a preferred option for those looking for reliable vehicle finance.
What sets MFC apart is its flexibility and range of options designed to meet different customer needs. Borrowers can select from flexible repayment terms of up to 96 months and can opt for features like balloon payments or fixed and linked interest rates. The company also partners with over 2,400 dealerships across South Africa, ensuring convenience and ease of access for customers. With a commitment to providing fast, efficient service and a transparent application process, MFC continues to be a top choice in the South African car loan market.
Key Facts
- Flexible Repayment Terms: MFC offers repayment periods ranging from 12 to 96 months, giving you the flexibility to choose a term that fits your budget and financial goals.
- Choice of Interest Rate Options: You can choose between a linked-rate option, which fluctuates with market rates, or a fixed-rate option that remains constant throughout the loan term, providing stability and predictability in your repayments.
- Balloon Payment Option: MFC allows a balloon payment option that can reduce your monthly repayments by deferring a portion of the loan balance to a lump sum at the end of the term, with a maximum of 35% depending on the vehicle’s age and model.
- Comprehensive Insurance Options: When financing your car through MFC, you must have comprehensive insurance, either through Nedbank Insurance or a policy of your choice, ensuring your vehicle is covered against various risks.
- Private Seller Finance Assistance: MFC facilitates safe and secure purchases from private sellers, ensuring the vehicle is technically inspected and roadworthy, and providing options to verify or obtain warranties.
- Value-Added Services: MFC offers additional services like extended warranties, service plans, and coverage for dents and scratches, providing comprehensive protection and maintenance options for your vehicle.
- The MFC Instalment Calculator is user-friendly and quickly provides information on what car you can afford.
Known qualification & document requirements
- You must be 18 years or older and have a clear copy of your ID document
- Be a South African citizen or foreign national with permanent residency
- Proof of income in the form of 3 months’ bank statements & payslips
- Have a valid driving license
- Proof of residence (not older than 3 months)
Fees
Initiation fee: R1207.50 once off
Monthly admin fee: R69
Time to receive funds
24-72 after application approval
Illustrative Example
Loan Amount: R100,000-00
Repayment Terms: 72 months
Annual Interest Rate: 11.5% (dependent on your credit rating)
Monthly Instalment: R2,021.41
Total Cost of Credit: R39,366-00 (interest)
Total Repayment: R145,541.50
*Please note this is just an illustrative example of what it would cost you. Your rate and initiation fee will be determined according to your personal risk profile. To get an accurate quote we recommend getting a quote from MFC.
Car Loans
Standard Bank: BEST for diverse financing options
Annual Interest (APR)
Personalised
Loan Amount
R50k plus
Loan Term
1 to 7 yrs
Apply on partner site
Pros & cons
Pros
- Standard Bank has a wide network across multiple countries, serving both local and international clients.
- They offer personalized interest rates and fixed monthly repayments for clear financial planning
- Simple application online, telephonic or at your nearest branch
- Flexible terms
- Their car finance calculator helps to see your affordability
Cons
- While the interest rates are personalized, they may be higher for those with a lower credit score
- The bank places a strong emphasis on online banking, which may not be ideal for those who prefer traditional, in-person banking methods
Our take
Overview
Standard Bank, one of the oldest and largest financial institutions in South Africa, has a strong reputation in the vehicle financing space. With a history dating back to 1862, the bank has built a comprehensive range of financial services, including car loans, tailored to meet diverse customer needs. Its Vehicle and Asset Finance division offers flexible finance options, from instalment sale agreements to financial leasing, allowing customers to choose the best solution for their car ownership goals.
Standard Bank stands out for offering flexible repayment terms, with new car loans available for up to 84 months and pre-owned vehicles for up to 72 months. Customers can select either fixed or variable interest rates based on their preference, and the bank provides a hassle-free early settlement option for loans under R250,000 without any penalties. With a network of approved dealers and a user-friendly online application process, Standard Bank ensures a seamless experience for those seeking vehicle finance.
Key Facts
- Flexible Repayment Terms: Standard Bank offers car loan repayment terms ranging from 1 to 7 years, allowing borrowers to choose a duration that best fits their financial situation.
- Fixed and Variable Rate Options: You can choose between fixed interest rates for predictable repayments or variable rates, which may offer lower initial costs but can fluctuate with market changes.
- Easy Application Process: The application for car loans can be completed online, in a branch, or by telephone, making the process convenient and accessible for all customers.
- Up to 100% Financing Available: Standard Bank provides up to 100% financing for qualified borrowers, eliminating the need for a large upfront deposit when purchasing a vehicle.
- Manageable Repayment Options: Borrowers can manage their car loan repayments and request settlement quotes directly through the Standard Bank Banking App, providing convenience and control over their finances.
- Comprehensive Car Loan Calculator: The Standard Bank Car Finance Calculator helps you estimate your monthly repayments and determine how much you can afford to finance, making budgeting easier.
Known qualification & document requirements
- You must be 18 years or older and have a clear copy of your ID document
- Be a South African citizen or foreign national with permanent residency
- Monthly income of at least R8 000
- Proof of income in the form of 3 months’ bank statements & payslips
- Have a valid driving license
- Proof of residence (not older than 3 months)
Fees
Initiation fee: R1207.50 once off
Monthly admin fee: R69
Time to receive funds
24-72 after application approval
Illustrative Example
Loan Amount: R100,000-00
Repayment Terms: 72 months
Annual Interest Rate: 11.5% (dependent on your credit rating)
Monthly Instalment: R2,021.41
Total Cost of Credit: R39,366-00 (interest)
Total Repayment: R145,541.50
*Please note this is just an illustrative example of what it would cost you. Your rate and initiation fee will be determined according to your personal risk profile. To get an accurate quote we recommend getting a quote from Standard Bank.
Car Loans
getWorth: Best for transparent pricing
Annual Interest (APR)
10.5-15%
Loan Amount
R50k-R1m
Loan Term
1-6 yrs
Apply on partner site
Pros & cons
Pros
- Transparent pricing using data analytics
- Flexible repayment terms
- Tailored for used car buyers
- Competitive interest rates
- Quick loan disbursement
Cons
- Primarily focused on used vehicles
- Higher interest rates for lower credit scores
- Limited information on specific fees
- Loan terms depend on vehicle value
- Early repayment may have penalties
Our take
Overview
GetWorth, established in 2017, is an innovative platform based in South Africa, specializing in the buying, selling, and financing of used cars. Their unique business model, which includes machine learning-driven pricing and an information-led approach, allows both buyers and sellers to benefit from transparent transactions. They offer customers an upfront cash amount and market the vehicle at a realistic price set by the seller, helping ensure fair deals.
In addition to their well-regarded customer service, GetWorth’s focus on technology-driven convenience sets them apart in the market. Their car loan options are designed for flexibility and cater primarily to used car buyers, providing competitive financing solutions that make it easier to purchase a vehicle from their wide selection of pre-owned cars.
Key Facts
- Loan Amounts: GetWorth offers car loans tailored to the purchase of used vehicles, typically aligned with the price of the selected car.
- Loan Term: Loan repayment terms are flexible, with options typically spanning between 12 to 72 months.
- Interest Rates: GetWorth offers competitive interest rates (10.5-15%), determined by the customer’s credit profile and the value of the vehicle.
- Used Car Focus: Financing is tailored specifically to used cars, with an emphasis on transparency and fair pricing.
- Technology-driven Platform: GetWorth uses data analytics and AI to provide accurate vehicle valuations and ensure fair lending practices.
Known qualification & document requirements
- Valid South African ID
- Proof of income (recent payslips or bank statements)
- Credit check
- Proof of residence (not older than 3 months)
- Valid driver’s license
Fees
While specific details regarding fees aren’t readily available, typical car loan fees such as initiation fees and monthly admin fees should be expected. It’s advisable to directly inquire with GetWorth for a detailed breakdown of applicable fees.
Time to receive funds
Once approved, GetWorth generally disburses funds within 1 to 3 business days, depending on the completion of all required documentation and the customer’s specific circumstances.
Illustrative Example
Loan Amount: R200,000
Repayment Term: 36 months
Annual Interest Rate: 12%, dependent on credit score
Fees: Initiation fee of R1,207.50 and monthly admin fee of R69
Monthly Instalment: R6,654.50 (calculated using the standard formula)
Total Cost of Credit: R39,558 (interest over the term)
Total Repayment: R239,558 (loan amount + interest + fees)
*Please note this is just an illustrative example. Your rate, fees, and loan terms will depend on your personal risk profile. To get an accurate quote, request one directly from GetWorth.
Car Loans
Standard Bank: Best for non-traditional borrowers
Annual Interest (APR)
N/A
Loan Amount
R50k-R250k
Loan Term
3 to 5 yrs
Apply on partner site
Pros & cons
Pros
- Higher approval rate than traditional banks
- Includes insurance and GPS in subscription
- Flexible rent-to-buy model
- No need for traditional credit scoring
- Wide dealership network
Cons
- No clear ownership until the rental period ends
- Subscription model might be more expensive than traditional loans
- Limited to vehicles available through partner dealerships
- May require a deposit upfront
- Ownership transition can take longer
Our take
Overview
Planet42, founded in 2017, offers a unique rent-to-buy car subscription service in South Africa. The company was established to address transport inequality by providing access to personal vehicles for individuals often rejected by traditional banks. Planet42 works by purchasing a vehicle from one of its 700+ partner dealerships and renting it to customers on a subscription basis, with the option to eventually own the car. Their service focuses on affordability, catering to customers who need reliable transportation but may struggle with traditional vehicle financing.
With a proprietary scoring algorithm and a high approval rate, Planet42 provides mobility to those who need it most, empowering people to improve their livelihoods through personal vehicle ownership. The company has already provided over 15,000 vehicles to customers across South Africa, and its flexible model continues to make car ownership more accessible for underbanked individuals.
Key Facts
- Loan Structure: Planet42 operates a rent-to-buy model where customers rent a vehicle with the option to own it later.
- Approval Rate: Planet42 has a much higher approval rate than traditional banks, helping more people access vehicles.
- Dealership Network: The company partners with over 700 dealerships in South Africa, offering new and quality used vehicles.
- Affordability: The subscription includes rental payments, insurance, and a GPS tracker, simplifying the cost structure for customers.
- Credit Flexibility: Planet42 uses alternative data points in addition to traditional credit scoring, allowing for more inclusive access to vehicle finance.
Known qualification & document requirements
- Valid South African ID
- Valid driver’s license
- Proof of income (latest 3 months’ bank statements)
- Payslip (optional but recommended)
Fees
Planet42 includes several costs within its subscription fee, such as vehicle rental, insurance, and a GPS tracker. Specific details on additional fees, like initiation fees, may vary based on individual agreements and should be confirmed directly with Planet42 during the application process.
Time to receive funds
Once an application is pre-approved and the required documents are submitted, final approval typically takes 24 hours. Afterwards, customers can quickly proceed to secure their vehicle through the rent-to-buy model.
Illustrative Example
Loan Amount: R150,000 (for a used vehicle)
Repayment Term: 36 months
Annual Interest Rate: Not applicable as the model is subscription-based
Fees: Monthly fee includes rental, insurance, and GPS tracking
Monthly Instalment: R4,500 (estimated)
Total Repayment: R162,000 (36 months of rental payments)
*Please note this is just an illustrative example. Your rate, fees, and loan terms will depend on your personal risk profile. To get an accurate quote, request one directly from Planet42.
Compare car loan rates with Fundrate's top picks
Lender | Best For | Est. Apr | Loan Amount | Loan Term |
|---|---|---|---|---|
Capitec | Flexible loan terms | 9-17% | Up to R500k | Up to 7 years |
WesBank | One-stop car services | 9-17% | R30k plus | 2 - 8 years |
Absa | Competitive rates | Personalised | R10k plus | 2 - 6 years |
MFC by Nedbank | Customer support and service | Personalised | R50k plus | 1 - 8 years |
Standard Bank | Diverse financing options | Personalised | R50k plus | 1 - 7 years |
getWorth | Transparent pricing | 10.5-15% | R50k-R1m | 1 - 6 years |
Planet42 | Non-traditional borrowers | N/A | R50k-R250k | 3 - 5 years |
Pros and cons of car loans
While car loans can help you buy a vehicle, they aren’t ideal for everyone. Consider the pros and cons before deciding.
- Affordable monthly repayments over time
- Improves credit score with payments
- Flexible loan terms up to 84 months
- Car ownership after final payment
- Access to better, newer cars
- High-interest costs over loan term
- Depreciating asset during loan period
- Penalties for early loan settlement
- No modifications until car is owned
- Balloon payments due at loan end
What is a Car Loan?
A car loan is a type of financing specifically designed to help you purchase a vehicle. With a car loan, you borrow a set amount from a lender to cover the cost of a car, and you then repay this amount in monthly instalments over an agreed period, with interest added. In South Africa, car loans typically come with fixed interest rates, making it easier to budget for monthly repayments. The car serves as collateral, which means that if you default, the lender can repossess the vehicle. Car loans are commonly used for both new and pre-owned cars.
Loan Use Cases
Why might you consider a car loan?
Car loans are primarily for purchasing a vehicle, but they offer flexibility depending on the vehicle type or your specific financing needs. Here are a few typical uses:
- Buying a New Car: Finance a new vehicle purchase from a dealership or manufacturer.
- Buying a Pre-owned Car: Get funding for a second-hand car, often at lower rates than unsecured loans.
- Upgrading Your Vehicle: Upgrade your current vehicle by financing a new or better model.
- Starting a Business Fleet: Small business owners can use car loans to purchase vehicles essential for their operations.
Loan Eligibility Factors
What do lenders look for when approving a car loan?
Different lenders have unique requirements, but most consider the following:
- Minimum Income Requirements: Lenders often require proof of a stable income, with monthly minimums starting around R3,000.
- Credit Score Considerations: While good credit can secure lower rates, lenders may still offer loans to those with lower scores but at higher interest rates.
- Employment Status Requirements: Stable employment or regular income is crucial; most lenders look for 6-12 months of employment history.
- Age Limitations: You must be at least 18 years old to apply, with some lenders requiring a minimum age of 21.
Credit Score Impact and How to Improve It
How does your credit score affect your car loan?
Your credit score has a direct impact on your car loan terms. A higher score can result in lower interest rates and better loan terms, while a lower score may restrict you to higher rates or require a deposit.
Tips to Improve Your Credit Score for Better Loan Terms:
- Timely Bill Payments: Consistently paying all bills on time builds a positive credit history.
- Lower Outstanding Debts: Reducing other loans or credit balances can improve your credit profile.
- Limit Credit Applications: Too many credit inquiries can lower your score; apply only when you’re ready to proceed.
- Review Your Credit Report: Check your report for errors and work with credit bureaus like TransUnion to correct inaccuracies.
Interest Rates Breakdown
How do interest rates work for car loans in South Africa?
Interest rates for car loans depend on your credit profile, loan term, and the lender’s policies. Here’s what to consider:
- Typical Interest Rate Ranges: Car loan rates in South Africa typically range from 9% to 20% APR.
- Factors Affecting Rates: Your credit score, the loan term, and the type of vehicle (new or used) play significant roles in determining your rate.
- Fixed vs. Variable Rates: Many car loans offer fixed rates, giving you consistent monthly repayments, though some lenders provide variable rates linked to the prime lending rate.
What is APR?
The Annual Percentage Rate (APR) represents the total yearly cost of your car loan, including both interest and any additional fees. APR is useful for comparing the full cost of different loans.
Early Repayment Flexibility
Can you pay off a car loan early?
Early repayment flexibility depends on the lender’s terms, so it’s important to understand these before committing:
- No Penalty: Some lenders allow early repayment without penalties, which can help you save on interest.
- Early Settlement Fees: Other lenders may charge an early settlement fee, so confirm with your lender to avoid unexpected costs.
- Check Terms Carefully: Review your loan contract or ask your lender for a clear explanation of any fees involved in early repayment.
Comparison with Other Loan Types
How does a car loan compare to other financing options?
- Personal Loans: Unlike unsecured personal loans, car loans are secured by the vehicle itself, leading to generally lower interest rates.
- Lease Agreements: Leasing a car may have lower monthly payments but doesn’t grant ownership of the vehicle.
- Credit Card: Although credit cards can be used for small vehicle purchases, they typically come with high interest rates, making them less suitable for larger purchases.
Car loans are often the best choice when purchasing a car, offering structured payments and ownership once the loan is paid off.
Regulatory and Legal Considerations in South Africa
What protections exist for car loan borrowers in South Africa?
The National Credit Act (NCA) provides essential protections to car loan borrowers in South Africa, such as:
- Interest Rate Caps: The NCA sets maximum interest rates to protect borrowers from excessive costs.
- Transparency in Loan Terms: Lenders are required to disclose all loan terms clearly, including fees and penalties, to ensure fair lending practices.
- Affordability Assessments: Lenders must evaluate whether the loan is affordable based on your financial situation, helping prevent unmanageable debt.
Alternatives to Car Loans
What are your options if a car loan doesn’t suit your needs?
Here are some alternative financing options:
- Personal Loans: For those without a high credit score, personal loans may still offer funding, although at potentially higher rates.
- Balloon Payments: Some car loans offer balloon payments to lower monthly instalments, though the final lump sum will be higher.
- Hire Purchase: Similar to car loans, hire purchase agreements provide a way to finance a vehicle but may include different terms and flexibility.
How to Apply for a Car Loan
Steps to securing your car loan:
- Verify Your Eligibility: Ensure you meet the income, credit, and employment criteria.
- Gather Required Documents: You’ll need your ID, proof of income, recent bank statements, and proof of residence.
- Compare Lenders: Use Fundrate to find the best rates, terms, and fees from reputable car loan providers.
- Submit Your Application: Complete the application process online or in-person, providing accurate information for faster approval.
- Receive Loan Approval and Disbursement: Once approved, the lender will disburse the funds directly to the car dealership or seller, and you’ll begin monthly repayments.
FAQs
What credit score do I need for vehicle finance?
If you are worried about your credit score and whether it’s high enough to qualify for a car loan, it’s likely that you’ll need to improve it to some extent. As with most loans, a lower credit score decreases your chances of getting approved.
Creditors generally view credit scores in the following way:
- Exceptional: 800+
- Excellent: 740 to 799
- Very Good: 670 to 739
- Good: 580 to 669
- Poor: 579 & below
A credit score above 580 means you are likely to be considered for a car loan. If your score is above 670, vehicle finance lenders will view you as a very good borrower, considering you less likely to default on your car payments.
Car loan vs paying in cash
Financing a car can be a convenient way to cover the cost of purchasing a new vehicle, especially if you don’t have the money upfront to buy it with cash. It can also make sense if using cash would deplete your liquid savings, leaving you without funds for emergencies or other important expenses.
However, if your primary goal is to save money on the overall cost of the car, financing may not be the best option. The interest charges on a loan mean you’ll end up paying more than you would if you bought the car outright with cash. Additionally, if you prefer to avoid debt or don’t want to commit to a monthly car payment for years, paying in cash might be the better choice.
What is an instalment agreement?
An installment agreement is a contract between you and the bank where you agree to make monthly payments for a specific amount over a set period. You can drive the vehicle you’ve purchased, but it remains the bank’s property until you have fully paid it off. Once all the payments have been completed by the end of the agreement, you gain full ownership of the vehicle. The interest rate on the installment agreement can be either fixed or variable.
What is the difference between a fixed and variable interest rate?
A fixed interest rate means the borrower secures a specific rate at the start of the loan, and this rate remains constant throughout the loan term. In contrast, a variable interest rate is tied to the prime rate and will change as the prime interest rate rises or falls.
Do I need to put down a deposit in order to get a car loan?
This will depend on your financial situation, but in most cases, a deposit is not required. However, it is advisable to put down a deposit to reduce the loan amount, which could help lower your monthly installments.
Do I need car insurance to finance a vehicle?
Yes, most vehicle finance providers require you to have car insurance. Car insurance protects you if your vehicle injures someone or damages their property. Depending on the type of coverage you choose, it can also protect your vehicle against theft and damage. It’s important to consider the cost of car insurance so you can include it in your budget along with monthly loan instalments, fuel, and service plan costs.
What is a balloon payment and what are the pros and cons?
Benefits of a Balloon Payment
A balloon payment is like a deposit that you make to the finance company at the end of your loan term, rather than paying a deposit to the dealer when purchasing the car. Essentially, your loan only covers a portion of the car’s purchase price, so the principal amount of your monthly payments is calculated on a lower amount, making your payments more affordable.
For example, if you buy a car for R400,000 with a balloon payment of 20%, your monthly payments would be based on a loan of R320,000. The remaining R80,000 (the balloon payment) would be due at the end of the loan term, typically 72 months.
Keep in mind that during this period, the interest portion of your monthly payment is still calculated on the full price of the car (R400,000). Even so, opting for a balloon payment can make monthly loan payments more manageable.
The Downside of Balloon Payments
While a balloon payment can lower your monthly payments, you’re also taking on additional debt to purchase a depreciating asset—the value of the vehicle may end up being less than the remaining amount owed.
If you are considering this option, it’s important to understand the concept of the break-even point—the point when the car’s trade-in value equals the remaining loan balance. When calculating the break-even point, remember to include the amount due as the balloon payment at the end of the loan term. Reaching the break-even point will generally take longer with a balloon payment than with a standard car loan.
What is the typical interest rate for car loans in South Africa?
Interest rates for car loans in South Africa typically range between 9% and 20%, depending on your credit score, loan term, and the lender. Rates may vary between fixed or linked (variable) options, with linked rates fluctuating alongside the prime lending rate.
How long does it take to get approved for a car loan?
Approval for a car loan in South Africa generally takes between 24 to 48 hours, depending on the lender and the completeness of your application. Some banks may offer instant pre-approval options for existing customers.
What documents do I need to apply for a car loan?
You’ll typically need your ID, proof of income (3 months’ payslips or bank statements), proof of residence, and a valid driver’s license. Additional documentation may be required for self-employed individuals or those with non-salaried income.
Can I qualify for a car loan if I have bad credit?
Yes, you may still qualify for a car loan with bad credit, but expect higher interest rates or stricter terms. Some lenders also offer specialized loans for people with poor credit, though these often require larger deposits.
Are there any additional fees associated with car loans?
Yes, car loans often come with initiation fees (ranging from R1,200 to R1,500), monthly service fees, and in some cases, an optional balloon payment structure. Be sure to confirm all fees with your lender upfront.
What is the maximum loan amount I can apply for?
The maximum loan amount you can apply for generally depends on your income, credit score, and the value of the vehicle. Most lenders finance between 70% to 100% of the car’s value, with higher percentages reserved for new vehicles.
How long can I take to repay a car loan?
Car loan terms in South Africa typically range from 12 to 84 months (1 to 7 years). Longer terms reduce your monthly repayments but increase the total interest you’ll pay over time.
Are there penalties for early repayment?
Some lenders may charge a small penalty for early repayment, while others, particularly for loans below a certain amount (e.g., R250,000), allow early settlement without penalties. Always check your specific loan agreement for details.
Do I need collateral to qualify for a car loan?
No, the vehicle itself serves as collateral for the loan. However, until the loan is fully paid off, the bank retains ownership of the car. If you default, the lender can repossess the vehicle.
How do car loan interest rates compare between banks and alternative lenders?
Interest rates offered by traditional banks tend to be more competitive for customers with good credit, while alternative lenders may provide more flexible terms but often at higher rates. It’s essential to compare options and understand all associated costs.
How we choose our best car loan lenders
To select the best loans, Fundrate evaluates the most prominent lenders in South Africa. Each lender was ranked focusing on four main categories:
Affordability
This section of the scoring evaluates interest rates, penalties, and fees. Lower rates and fees, along with fewer penalties, contribute to a higher score. Lenders that offer rate discounts, grace periods, and the option to change the due date receive bonus points.
Availability
This category considers factors such as minimum loan amounts, number of repayment terms, eligibility requirements, the option to apply with a co-borrower or co-signer, and the loan turnaround time.
Customer experience
This category includes customer service hours, the availability of online applications, online account access, and mobile apps.
Transparency
For this factor, we assess how clearly information is presented to borrowers on the lender’s website. This includes details on credit requirements, rates, fees, and the availability of prequalification.