Extended loan terms boosts vehicle financing in SA

Extended loan terms are becoming increasingly popular among credit providers in South Africa as they aim to accommodate consumers facing financial challenges amidst high inflation and soaring interest rates. The latest development in this trend is the introduction of a 96-month repayment scheme for vehicles, allowing customers to spread out their payments over an extended period. Keamogetswe Mosepele of CNBC Africa engaged in a conversation with Junior Shabangu, Head of OEM Automotive Partnerships at WesBank, to delve deeper into the dynamics of this emerging trend. Shabangu highlighted that the demand for 96-month financing is currently relatively low, accounting for less than five percent of their customer base. However, he emphasized that the decision to offer extended loan terms is driven by the pressing needs of South African consumers, who are increasingly prioritizing affordability in the face of rising living costs, vehicle prices, and interest rates. Shabangu underscored that access to a car is often essential for individuals to secure employment and earn a living, making it imperative for financial institutions to provide solutions that enable financial inclusion and economic participation. Despite the risks associated with longer loan terms, WesBank carefully assesses each customer's creditworthiness and adherence to regulatory guidelines to mitigate potential challenges. While the primary focus remains on new cars due to decreased risk and added manufacturer warranties, Shabangu noted that the bank is exploring ways to address the growing trend of cash-strapped consumers opting to rent vehicles instead of seeking traditional financing. He emphasized the institution's commitment to responsible lending practices and compliance with industry regulations to safeguard both customers and the financial sector. In response to concerns about the impact of extended loan terms on resale values and potential allegations of reckless lending, Shabangu reassured that WesBank operates within the legal framework and regulatory oversight, ensuring transparency and accountability in their financial services offerings.