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CaseLaw
CaseLaw, Attorney
Category: South Africa Law
Satisfied Customers: 1339
Experience:  BCom; LLB; Masters in Law
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I bought car that is financed by the bank, but I have just

Customer Question

I bought car that is financed by the bank, but I have just picked up now that in the contract the car dealer mentioned that I paid deposit of r15 000.00 and he also mentioned that the car has extras like mag rims but that is not reality because the car is standard according to Mercedece Benz company which the manufacture of the car, please advice me if I can change the legality of the contract
Submitted: 1 year ago.
Category: South Africa Law
Customer: replied 1 year ago.
I did not pay any deposit for the car, after two years in the contract when I want to trade in the car for another one I'm told that the car will need me to pay hundred thousand extra because it owes more than the book value
Expert:  CaseLaw replied 1 year ago.

Hi there and thank you for your question,

When the dealer told the bank that you had made a deposit of R15k, I think that he did that to assist you because the bank will be more likely to give you a loan IF you've made a deposit on the vehicle. i.e. Not a 100% loan, but rather a 90% loan or something like that.

If the vehicle was worth R100k, the dealer would have told the bank that it was worth R115k and that you had paid a deposit of R15k, so the financing required was therefore R100k. The bank would have paid the R100k to the dealer, and everyone would have been happy. The "deposit" was never actually paid by you. The car would have just been "recorded" as being worth more.

The mag is a strange one, because making a vehicle appear to be worth more would have decreased the bank's likelihood of giving you a loan. So I don't really know why this was done. It's strange.

When you trade in a vehicle before 3 years, it is often the case that you've only made a small dent in the capital value of the vehicle because you've been paying back interest! That's why people wait AT LEAST 3 years to trade it in, and more often than not 4 years.

Also, the vehicle's price would have dropped during that 2 year period. The book value.

This means that while you've been paying off the interest on the vehicle for the past 2 years, and making small payments towards the capital value, the book value of the vehicle has actually dropped MORE than your capital payments. That means that if you trade the vehicle in, you'll actually need to PAY the bank to take the vehicle from you!

My advice to people who are in this situation is NOT to trade the vehicle in. Rather keep it until you've paid off everything. Carry on using it for 5 years after you've paid off everything ... then sell it.

You might have a claim against the dealer who assisted you with your credit application form with the bank. But at the end of the day YOU are the applicant for credit, and unfortunately the bank will say that YOU needed to ensure that the information was correct before applying for credit. i.e. the bank won't really assist you, and the dealer will tell you to get lost.

This happens more often that you would think!

This does not mean that you can cancel the financing contract with the bank. The bank will hold you to the contract, and will not see the deposit issue as being any reason to cancel the underlying contract. The bank also didn't induce you to enter into the contract, so you can't claim inducement from the contracting party to cancel the agreement.

Unfortunately it was the dealer who induced you, or at least lied to you. You could take it up with the dealer principal, or Mercedes SA, however you probably won't have much luck there.

If my answer hasn't answered all of your questions, please send me a REPLY with follow up questions so that I can continue to assist you in this same thread for as long as you need. Let me know if you need more advice - don't just rate my answer as "bad".

If my are HAPPY with my answer then please click one of the STAR ratings or the SMILEY FACES to rate my answer!

Good luck and best regards,

CaseLaw

Please note: This answer does not create an attorney-client relationship. Please consult a local attorney in person for legal advice. This information is being provided so you can better discuss legal matters with your attorney.

Expert:  CaseLaw replied 1 year ago.

Hi there again,

I hope that you understood the above advice and that it was useful? Please leave positive feedback for me.

If you have a further question please ask it?

Regards

CaseLaw