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Johannesburg - Some 6 000 to 7 000 vehicles are being repossessed each month because their owners can no longer afford the payments.
This means that banks are losing R500m to R600m worth of income each month.
Marcel de Klerk, chief executive of Absa's vehicle and asset finance division, says the bank is currently repossessing about 1 350 cars a month, slightly down on the 1 479 at the end of last year.
He estimates that the entire industry is now reclaiming up to 7 000 cars a month, significantly more than last year.
The average price of a repossessed car is about R135 000. "Last week we took back a R5m Ferrari," De Klerk commented.
According to him, hire purchase transactions on vehicles have declined sharply.
In 2006 and 2007 the market below the age of 35, earning R10 000 to R15 000, rose rapidly.
"This market segment is now so overwhelmed by debt that we are entirely unable to make advances within it."
This has had a negative effect on Absa's credit extension because this sector constituted 35%-odd of Absa's total vehicle market.
It's alarming that about 35% of all applications for credit currently received have some or either negative credit rating. Of the remaining 65% of applications being considered, only about 30% are eventually approved.
According to De Klerk, consumers are advised to aim for smaller models if their applications are turned down.
Lawrence Twigg, chief executive of Absa's division for personal loans, says only 30% of all applications for advances are approved. About 22 000 are approved each month.
A new development is that many of the loans Absa approves are not in fact taken up by the borrower. A loan takes only one or two days for approval.
"We ascribe this to consumers accepting loans from competitors, where they are approved more rapidly," De Klerk said.
Doug Walker, head of Absa's car division, said the criteria for issuing credit cards are more exacting, but about 150 000 are still issued each year.
"Compared with the 350 000 new workers entering the market each year, this is actually a modest figure," he commented.
About 15% of all credit card applications are declined.
Walker acknowledged that in the past mistakes had been made in sometimes approving cards injudiciously, aggravating the current bad debt situation.
- Sake24.com
For more business news in Afrikaans, go to Sake24.com.