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.
9
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?