Car financiers vow lenience during Covid-19 lockdown

Banking institutions’ relief measures under the national Covid-19 lockdown will include the vehicle finance market.

TimesLIVE Motoring this week approached the vehicle finance divisions of the big four banks in South Africa, enquiring about intended plans to assist customers whose ability to honour repayments might be affected, due to diminished earning potential during the countrywide intervention aimed at containing the pandemic.

Faisal Mkhize, managing executive: vehicle and asset finance, retail and business at Absa, explained that the company received a “meaningful” increase in calls from its customers after the announcement of the lockdown by president Cyril Ramaphosa last Monday, March 23. “The increase in enquiries was mainly driven by uncertainty and not the need to restructure”.

He announced an introduction of “an extensive payment relief programme for individuals and businesses affected by the lockdown”.

Mkhize told us, “The payment relief programme will give customers with up-to-date accounts the opportunity to continue paying if they are in a position to, or to defer payments for a period of three months.”

He added that the vast majority of its customers qualify, while those under debt review are excluded.

Despite acknowledging the recent sovereign downgrade by ratings agency Moody’s, Mkhize offered assurance to customers, saying, “South Africa's financial system remains stable, it has withstood significant challenges, including the global financial crisis of 2008” and that Absa had “built substantial buffers to withstand marketwide systemic shocks such as the current event.”

Nedbank and its Motor Finance Corporation (MFC) division stated, “We are committed to supporting our clients during this time of uncertainty and offer several options to clients, based on individual circumstances, rather than a one-size-fits-all approach.”

Head of group media relations, Kedibone Molopyane said payment arrangements, payment holidays and restructures were part of the offerings. She confirmed that all customers would benefit, “irrespective of the client’s standing with the bank” and encouraged clients to reach out and discuss their specific needs.

“Customers who are in financial distress should contact the bank as soon as possible, the sooner the bank is informed, the sooner both parties can find a workable solution to address or resolve issues of financial distress,” advised Simphiwe Nghona, head of vehicle and asset finance for Standard Bank. “Our customers’ financial wellbeing remains our concern.”

Meanwhile, Nghona expressed gloomy predictions for the automotive retail channel, reiterating that dealerships and equipment suppliers would see a decline in sales and face negative impacts on financial operations given the mandates of the lockdown. “In addition, the lockdown will result in lower vehicle purchases as customers delay or postpone vehicle replacements.”

He warned that the full impact of Covid-19 may only be felt in the local market towards the middle of the year, since manufacturers and dealers work on a forward-order stock method.

“The drop in new car sales is expected to result in further shifts towards used cars which will provide a cushion for dealerships as the industry recovers.”

Representatives at the WesBank division of First National Bank (FNB) were unable to respond to our individual list of questions by the time of publication. However, it released a statement this week informing that, “Our interventions will assist customers who demonstrated sound banking behaviour, such as having honoured their repayments to the bank on a consistent basis prior to Covid-19.”

“The type of relief and the implementation thereof will vary depending on the type of product each customer holds.”

In an interview with TimesLIVE Motoring, Dr Martyn Davies, automotive leader at Deloitte Africa said he was concerned about the high level of indebtedness of motoring consumers in SA.

He added that certain relief options may represent a short-term “kicking the can down the road” approach in terms of this debt. “If we go back 15 years, the average period of [vehicle] finance was 55 months, whereas now it nudges 70 months.”

Davies spoke with uncertainty about the prospect of recovery in the manufacturing sector. “There is no easy answer to this, it is going to take a while, will there be pent-up demand? Are we waiting to spend? No, we are waiting to see what happens.

“Almost 60% of our production is exporting, but there is no demand globally, so where will our cars go?”

He concluded, “People will continue to buy food because they have to, but cars are expensive items, you do not buy them every day. We have to wait for demand to come back.”