Finance, settlement letters and who really owns the car

Ask for the registration certificate before anything else and read two lines on it: the registered owner and the title holder. On a financed car the title holder is the bank, and the person selling the car is only the registered owner, which means they may use it but may not transfer it until the account is settled. Compare the identity document in the seller's hand with the name printed there, and compare the vehicle identification number on the paper with the one stamped on the car.

If the seller cannot produce the certificate, stop. We have watched a reader nearly pay a deposit on a car whose papers were with a relative in Rustenburg, and the relative turned out to be the actual owner with no intention of selling. A missing certificate is not always fraud, but it is always a reason to wait.

The seller asks their bank for a settlement letter. It states the amount needed to clear the account and the date until which that amount holds, usually a short window measured in days. You pay that amount directly to the bank, not to the seller, and you pay the balance to the seller only once the bank confirms. The bank then releases the papers so the change of ownership can be registered.

Two things go wrong here. The first is a settlement figure higher than the asking price, which happens constantly on cars bought with a long term and a balloon payment, and which means the seller has to find the shortfall from their own pocket before anything can proceed. The second is time: the release of papers can take a week or more, and a seller who promises same-day release is promising something that is not theirs to control.

A balloon payment, or residual, is the lump the buyer agreed to pay at the end of the term so that the monthly figure looked like something they could afford. It is why so many well-kept cars are worth less than their owners owe. If you are the buyer now, this is useful: a seller trapped under a balloon is motivated. If you are planning your own next purchase, take it as a warning about structuring a deal around the monthly number alone.

Our view, stated plainly because readers ask for it: on a pre-owned car, a shorter term with a higher monthly payment and no residual leaves you free, and freedom is worth more than a lower instalment. The driver who can sell their car in a bad month without phoning a bank first is in a much stronger position than the one who cannot.

Never pay cash for a car in a parking lot. Do the transfer from your own banking app while you are sitting with the seller, to the bank's settlement account for the financed portion and to the seller's verified account for the rest, and wait for confirmation before keys move. Instant payment limits matter here: check yours in advance, because a transfer that only clears in two working days turns a Saturday handover into a week of nerves.

A deposit should be small, written down and conditional. A simple signed note naming the car, its vehicle identification number, the amount paid, what it secures and under what conditions it is refundable will do. If a dealer asks for a non-refundable holding deposit before you have seen a roadworthy or a settlement figure, that is a request to pay for the privilege of being rushed.

Buying from a registered dealer gives you the protection of consumer law, including an implied expectation that the goods are of reasonable quality and a defined period in which to raise a defect. That protection is real and worth paying a dealer margin for, but it is not a mechanical warranty, and it will not cover wear items or a fault you were told about in writing before you signed. Read the defects annexure; that is where the dealer records what they disclosed.

A private sale is normally voetstoots: as it stands, faults and all. The seller still may not lie to you, and deliberately hiding a known defect is a different matter, but proving it afterwards means lawyers and time. This is exactly why we push so hard for an independent inspection on private purchases. The R1 450 that an inspection costs is the cheapest insurance in the transaction.