As consumers are increasingly squeezed on all sides by rising inflation (now at a high of 7%), increasing interest rates, high fuel and food costs, the latest Eighty20/XDS Credit Stress Report (Q4 2022) shows an alarming trend – an increasing appetite for credit, with more than 800,000 South Africans entering the credit market for the first time in the fourth quarter of last year.

Even more disturbing, the report reflects a surge in the number of credit card, vehicle asset finance and home loans that are newly in default.

Those new to the world of debt took out a whopping R9.3-billion in new loan value, the highest in more than two years, and up nearly 10% on last year. The total credit-active population now stands at 18.7 million, with total loan balances at an astounding R2.3-trillion.

“These statistics show that South Africans are increasingly turning to credit to survive the relentless onslaught of cost-of-living increases that seemingly have no end in sight,” says chief executive of Debt Rescue, Neil Roets.

Andrew Fulton, director at Eighty20, says the credit stress in the middle class appears to be even more pronounced for “heavy hitters” – South Africa’s wealthiest 5% of the population. Home loans have created significant pain for consumers in this segment, with a steep 25% year-on-year increase in average mortgage instalments due largely to rising interest rates.

The 25 basis point interest rate hike on 26 January brought the prime lending rate to 10.75%, the highest it has been since 2009, and had the effect of increasing monthly instalments on a R1.5-million loan taken out in 2021 by R3,400 in little over a year. This pressure is noticeable, with 24% of heavy hitter home loans going into default in the fourth quarter.

The report shows that the rate of default on car loans increased by 30% among the middle class (average income of R15,000 a month) with car loans defaulted in the fourth quarter of 2022. The “heavy hitters” or wealthiest 5% did not fare any better, with a 30% increase in their rate of default on car finance as well. If you are struggling to manage your car repayments, it might be time to downgrade to a more affordable car.

Weelee chief executive Marc Friedman says there are 10 ways to make sure you get the best price for your wheels:

1. Value: First, determine your car’s current market value. This is the value that the same vehicle as yours would typically sell for. It fluctuates quite a bit, depending on which channel you use to sell your vehicle (for example, a private sale versus selling to a car dealer), as well as other variables such as your car’s condition, mileage and service history. You can get a car value report from TransUnion for just R10.
2. Compare channels: Weigh up the pros and cons of each sales channel. Selling your second-hand car privately, for example, might generate the most cash. However, you are exposed to more risk from unknown parties – who could well be scammers – coming to view your car. You may also have to wait a long time before an ideal buyer comes along. A trade-in at a dealership might be a simpler way to sell your car, but you are likely to get less for it. Well-established, trusted online platforms that get you a number of offers for your car are becoming increasingly popular.
3. Service history and paperwork: A full service history can make a massive difference in the price you get for your car. Ideally, your car would be serviced regularly at an approved service centre and the service book stamped as proof thereof. Also make sure that all paperwork, including registration documents, are available and that licence discs are up to date.
4. Detail-driven: When advertising, spend time on a detailed description specifying the car’s make, model and mileage, as well as any other specifications and optional extras. This not only builds buyer confidence in your vehicle, but also avoids a lot of unnecessary to-and-fro communication.
5. Quality pics: Take good-quality photos, from all angles, to showcase your car. It’s smart to include pictures of the engine bay and interior as well.
6. Tidy up: Be sure to wash your car and/or take it for a valet before taking the pictures. You want to ensure it looks appealing to all prospective buyers.
7. To fix or not to fix: Fixing those little dents, scrapes or minor mechanical issues sends a message that you cared for your car and could get you a higher price, especially when selling privately. However, this is sometimes unnecessary when selling to a dealer since they can often perform minor fixes at a lower cost and won’t necessarily pay you more if the fixes have already been done.
8. Honesty is key: Be honest upfront about any issues and imperfections, so that the buyer is aware. This goes a long way towards building trust.
9. In contact: Make sure you are reachable through the contact details provided – missing one call or email might mean losing out on your best offer.
10. Learn the jargon. Know the following terms so you get the most money out of the deal:

Retail price: This is the price of the car when someone buys it from a dealer. The selling price: trade-in price plus the dealer’s profit/mark-up. If you sell privately, you will get the retail price.

Trade-in price: This is the price that the dealer will pay you for the car. This will go towards settling your vehicle finance or you’ll receive it as cash towards another car.

Book value/“blue book value”: Dealers may talk about the blue book value – this is the industry-accepted dealer valuation book by TransUnion on which they will base their price. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.