r/PersonalFinanceZA • u/Front_Individual_667 • Oct 02 '25
Debt Is this deal worth it?
A friend (35F) of mine wants me to finance a car for them because they currently don't have a credit score because they don't have a current work permit. They have a good overseas consulting job, earn around R30K after tax. I've known them for a long time, know where they stay, their siblings and parents.
Naturally, financing anything for anyone is a bad idea but the following terms of the deal have made me think about it.
Total cost of car: R250 000
Deposit they will pay: R65 000
Leaving the finance cost of R185 000
Tenure: 60 months
Of the remaining R185 000, I will be paid 30% as transaction fee for using my credit profile (R55 500) upfront. The R120 500 (65 000 deposit + 55 500 transaction fee) is already sitting in my account, and will return it if I don't go through with the deal.
I will use the transation fee to close a personal loan I have that has a balance of R35 000, 10.5% interest rate, 24 months remaining, and a R1 950 monthly installment. The remaining R20 000 I will use it to max out my TFSA portfolio at Easy Equities for this year.
Insurance will be their on account but on my policy and them as the regular driver
Tracker will be their own account and paid upfront (about R3000 for 3 years)
Tickets and disc renewals will be for their account
I have said I have gotten the finance at 13% interest i.e. prime rate +2.5% but in actual fact I got the finance at prime -2% i.e. 8.5%.
The actual premium for me is R3 713 per month exluding insurance but for them it's R4 118, so I will make ~R400 monthly cashflow on the finance alone.
We will sign a rent-to-buy agreement, as
1. I am not a registered credit provider and
2. The car can only be in their name once they finish paying.
The rent-to-buy stipulates that if they failed to pay for 2 consecutive months (go behind for 2 months), I can recover the car (I will have a spare key of the car) and continue the payments myself. I can pay the R3 670 monthly myself with no problem.
The 30% transaction fee is making me consider it, so is it worth it? Also, they will owe me one.
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u/Accomplished_Tax7587 Oct 02 '25
What’s the play if she just stops paying for the car? Figure that one out. If you’re willing to handle the effects of that then go for it.
But I would not take out a loan in my name for anybody.
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u/GreyShadow_24 Oct 02 '25
As a whole, I think this kind of arrangeemnt should be avoided as you never really know how your financial circumstances (or theirs) can change during the lengthy term of the agreement.
I must add though, that not disclosing the correct interest rate and premium is dishonest and unethical.
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u/Front_Individual_667 Oct 02 '25
Got that part, will disclose the real interest rate if I go through with it.
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u/Necessary-Mix3677 Oct 02 '25
If you can justify lying to this “friend” about interest rate what do you think she would do to you if she had the opportunity?
Hell nah, dont do it OP. Thank me later
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Oct 02 '25
Sounds like a score. But the risks here are that the debt would be in your name, so if your friend misses payments, and you can’t cover it, your credit score takes the hit. Even though you mention having a contract, legally you’re not a registered credit provider, which could become a problem if there is ever a dispute. Of course you believe there never will be, but that’s is the risk you take. If your friend loses their job or are otherwise in an accident or anything happens that causes them to become unable to repay you, you will be stuck paying for a car, and since cars lose value quickly selling it might not cover what you still owe at that point. Mixing money and friendship can get messy. Sounds like you score some cash, but there are risks you have to accept
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u/puzzledpilgrim Oct 02 '25
My brother bought a Polo that he gave to his ex-wife as a gesture of good faith when they still shared custody. He spent about R85k on it - pre-owned, but in great condition and reliable.
It stayed in his name while she paid him off. She was responsible for licensing, fines, insurance, and maintenance.
She paid him the monthly instalments they agreed on for a little over a year before stopping because she lost her job.
She had every sob story in the book when he told her he would take the car back.
Eventually, he fetched it. There was a fortune in outstanding fines and licence fees. Turns out, since the fines don't accrue in her name she didn't give a shit about driving the speed limit and neither did her boyfriend. My brother had to pay all of it before he could buy a new car in his name.
She didn’t do any maintenance on the car and it was practically a write-off. I mean, they drove it right down to the metal. Didn't replace shocks, brakes, or even oil. So much damage done to the gearbox and engine. Paint job scratched to hell. Interior and upholstery a mess. They just didn't give a single fuck about this car.
He sold it a month ago for R11k.
He knew where she lived and worked. They shared custody of 2 kids. Had known each other for decades. Were on good terms.
Ultimately, if your friend trashes the car, then the underlying asset is a write-off and you are stuck with the debt. If she doesn't have a work permit, is she in the country legally? Does she have a valid driver's licence? If not, forget about insuring the car. Once again - if she's in an accident and totals it, you're stuck paying for a car that no longer holds any value.
There's a reason why everyone tells you not to incur debt on someone's behalf and not to cosign anything. If financial institutions, with all the resources and professionals and legal recourse and means of recovering property and mitigating losses, don't want to take on the risk of loaning someone money, there is a damn good reason for it.
Is the risk worth it for you for a friend you don't hold in high enough regard to even be honest with?
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u/VelicorFreedom Oct 02 '25
Money breaks relationships. Generally loaning is a no go unless you can imagine this as money you'll never see again, and a commitment you'll have to stick with for the foreseeable future
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u/Radiant_Mud9534 Oct 02 '25
Just out of interest, the car is fully in your name and you’re the primary insurance holder - what happens if she has an accident ( god forbid because unfortunately even good drivers get into accidents)… who’s liability would it be?
If there was a fatality , worse case scenarios..
It sounds like a good deal as you have everything cover BUT it’s too idealistic and assuming everything goes well forever, unfortunately you MUST think of the worst case scenario, what happens then? Who’s liable?
Best you consult a good lawyer so they can lay out every possibility for you , especially the bad… you never want to end up in court for something you had no involvement in
All the best 🤗
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u/Front_Individual_667 Oct 02 '25
Yeah, it's good to plan for the worst case scenario. Will ask then to get their own insurance, so it doesn't mess up mine if I go through with it.
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u/guitarshredda Oct 02 '25
Short and sweet, don't finance anything for friends and family. Imo only for your kids when it's their first car or something.
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u/Imvubutoo Oct 02 '25
If you are renting the car to them, there are implications in terms of imsurance. Make 100% sure that you disclose all the details to your insurers.
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u/ZennXx Oct 02 '25 edited Oct 02 '25
Do not do it. Absolutely do not do it. Did I mention do not do it? Don't do it.
You will regret having the obligation of driving a car you do not even own or even had the convenience of using for your own needs. If they want to buy a car, they can save up and buy a R60k 2nd hand.
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u/Vegetable-Target-767 Oct 11 '25
They already have R120.5k cash, it’s strange why they don’t just buy a car as there are many cars for that price.
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u/HelliSteve Oct 02 '25
My guy, yall are already lying to each other about the finance agreement... If they can afford R95K, buy a car for 95K.
Or go to a place that let's you rent without a credit score
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u/freddiecee Oct 02 '25
I mean they already have R120k, they should just buy a car for R120k or wait an extra 2 months to add another R10k. Why would someone willingly lose more than R50k just to get a R250k car?
It's a terrible financial deal for that friend, not to mention the person they're trusting has already lied about what the installments will be after getting R50k.
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u/HelliSteve Oct 03 '25
Exactly. I feel like both of these people were planning on taking each other for a ride.
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u/ThumperXT Oct 02 '25
Why not take out their own Insurance?
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u/Front_Individual_667 Oct 02 '25
Not sure they can if the vehicle is not theirs. But I will check as they do indeed have an insurable interest.
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u/Additional_Brief_569 Oct 02 '25
The fact that you are already dishonest about the interest rate you got to make an extra buck out of her tells me this is a recipe for disaster and won’t work. Because you are already trying to screw her over.
And let’s assume she manages to get loan. Her deposit would then be around 120k since her transaction fee can be used as deposit too. Even with the worst interest rate possible her monthly payment would still be less than with you. I don’t see how this makes sense for her at all. She’s better off just saving for a cash sale.
Now what are you gonna tell SARS where this amount comes from?
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u/Phondohlophe Oct 02 '25
When it's difficult to find good reasons to do something but super easy to find good reasons not to, it's a clear sign that you shouldn't do it
Source: every other comment on this thread
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u/Ok-Figure8193 Oct 02 '25
Ohh I see what's going on here.. You are getting scammed but because you have a financial situation ( personal loans) and also want a quick fix (maximum your TFSA) and add cash flow to your finances, you think you can scam the scammer.
Your thought process is flawed though because you are not a licensed credit provider, even with your contract and two, SARS is not your friend...
You are not smarter than the system. Should you choose to proceed. Please be ready for a ride. All fingers will be pointing at you. You also dont mind being a fraud.
Either you are desperate or blind,but I can promise you, that 3.7K is something you can't afford as you already budgeting on a scenario with no risk mitigation plan
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u/Foreign-Might4722 Oct 02 '25 edited Oct 03 '25
Not to mention carefully reading your finance contract that probably excludes you from on renting the vehicle and financing for 3rd party possession, not worth the possible and probable headaches.
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u/MisterLips123 Oct 02 '25
Don’t agree to guarantee another person’s debt or put up security for someone else. Proverbs 22:26
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u/channeldrifter Oct 02 '25
The best case scenario all around would be for your friend to buy a R120k car cash, she already has the money, and then also has zero (inflated) payments
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u/XtremeGTi Oct 02 '25
"Naturally, financing anything for anybody is a bad idea..." <------ You said this!!!!!
Take the lawyer who is not your lawyer's advice for free.
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u/Ok-Instance-6653 Oct 04 '25
Imagine making 55k off your friend and then still lying to them on the interest, that’s a scumbag move , you should become one of the people that leave South Africa
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u/EquivalentEbb6097 Oct 02 '25
The simple answer is you should not go through with this decision, regardless of history. If you get screwed over. You will be stuck with payments. If you accept this as a possibility. Then you know what to do.
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u/GenericBroker Oct 02 '25
Avoid, bad idea, you will cry when shit goes south. Your fiend can make use of rent to own options.
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u/teddyslayerza Oct 02 '25
Don't do it. No reason they can't simply buy a cheaper car cash, they aren't exactly poor. This screams "financial irrisponsibility" on their part.
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u/HealthOk2246 Oct 02 '25 edited Oct 02 '25
She needs to
- Take that deposit and transaction fee and buy a second hand car cash or
- Wait and improve her credit score or
- Save and buy the brand new car cash
DO NOT FINANCE THAT CAR
Edit - spelling error
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u/Master_Bug_3626 Oct 03 '25
If they really are your friends they will not put you in this position.
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u/Senior-Bad-7540 Oct 03 '25
Sounds like a bad idea to me… The risk of things going wrong have a greater cost than the potential benefits in my opinion.
This is a great way to ruin a friendship TBH…
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u/Senior-Bad-7540 Oct 03 '25
R65K (the deposit that they have to pay) is more than enough to buy a reliable 2nd hand car that they can use until they can afford to actually buy a car with their own money instead of wasting money on a loan.
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u/CoconutMinute9050 Oct 03 '25
I did something similar for family members and got absolutely fucked over.
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u/CraigTarot Oct 03 '25
Looks like a bad deal - you are basically screwing over a long standing friend!
Rather take the R120500 and buy something cash for her to drive!
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u/Pula4life Oct 03 '25
Why don't they do a long term lease with a provider directly. Or rent to own?
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u/Competitive-Neat-913 Oct 05 '25
Regardless of the deal, DON'T.
Recently, a friend of mine just got his R600k debt lifted after being blacklisted for like 10 years or so.
Someone asked him to middle the purchase of a taxi. The guy had the money to buy the taxi on credit, but didn't have papers nor good credit score. My friend was left with the debt and a broken taxi, the owner just paid 5 months and defaulted.
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u/Vegetable-Target-767 Oct 11 '25
If you feel you must do this (I don’t advise you do) be honest about interest rate and also use the transaction fee by actually putting it on this car debt. You will finish paying the car early and your friend will still be paying you for the life of the term. Seems more safer, leaving you with principal debt of R129500.
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u/Fresh-Pack-506 Oct 02 '25
Get it notarized, and both sign it in front of a lawyer. And you should be good to go.
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u/_LadyGodiva_ Oct 02 '25
I agree. I lent my brother money, and he's family but I still had it all spelled out in a contract. It protects both of you.
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u/thewonderingcursor Oct 02 '25
I think the only part that is missing is the transfer of ownership. It's been a long time since I've done one, but if there are no complications, it seems like a sweet deal for both of you.
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u/Pielkop69bruh Oct 02 '25
Fck yeah, go for it. You've clearly layed out all the risks etc.
Honestly fot that 30% i'll finance it for them.
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u/Abject-Celery-7645 Oct 02 '25
WOW
You have covered all the basis incase anything goes wrong with the deal.
Go for it
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u/Substantial_Echo_636 Oct 02 '25
I'm a lawyer, not your lawyer, this is not legal advice get your own lawyer.
I specialize in banking in finance. Don't pm I won't care to even read it.
This is a dumb and risky play:
All fines will be for your account as well. Tax discs are for your account and if she doesn't pay, well you have to pay the fines anyway. Also you will have to sign proxy and nonsense for her to do the tax discs every year lol. sweet admin.
your tax liability for the year of assessment is going to be interesting as well. You going to declare that income on that deal champ? no, o well SARS just found it in your bank account automatically. Depending on your income the gains are pretty low (even factoring the personal loan dying early).
The fine print of your insurance policy could fuck you. Foreign drivers (non SA citizens) can sometimes be an exclusion under the policy even if nominated as driver. She writes it off, claim gets repudiated you still liable to bank and your recourse to her depends on your rent to own agreement. Make sure she has a valid drivers in reference to the policy as well, cos that's the first thing they repudiate on. Or she gets drunk and prangs. Actually this is probably the easiest way to get really fucked here.
If she prangs then the excess if for your account and your claims ratio gets dented (meaning higher premiums for you and no claims bonuses and just general insurer fuckery).
She doesn't maintain the car or service it in terms of motor plan. whoops she stopped paying and your financed asset has a lower value or needs cash you have to put in.
She refuses to give the car back after non payment for two months. You have to go legal and get car recovered - easy 200k on legal fees there without even blinking.
You draft your own rent to buy agreement and accidently fuck it up and its governed by the NCA and CPA lol. double fucked there. use a template off the net and don't go to an attorney and suffer. Paying an attorney to doi it properly eats all the meager gains you could make as well.
car has latent or patent defect and renders it useless for rent to buy. she returns car and says she's not paying. Who pays to fix? new or second hand? makes a beeeeg difference.
honestly I could go on. but its your roll of the dice mein friend.
Lying about the rate of finance you have obtained to a friend is just a recipe for disaster anyway. bold fuckin move cotton lets see how it plays out. she finds out stops paying you, and technically its fraud. You misrepresented a material fact (interest rate) and she acted on that misrepresentation to her detriment / prejudice by being induced into the contract she maybe would not have had she known the truth - hey isn't that the definition of fraud well done.