Win some, lose some: How court judgment affects 'on the road' fee a car purchase saddles you with

The consumer ninja joins Motheo Khoaripe (in for Stephen Grootes) on The Money Show.

When you buy a car, there are a whole range of fees you get saddled with.

One that is particularly controversial is the 'on the road' (OTR) fee, which is added to the financed prices of cars sold through dealerships.

Consumer journo Wendy Knowler reports both good and bad news for consumers this week on this sometimes contested fee.

While car buyers are stuck with dealerships and their car finance partners adding the OTR charge to contracts, thanks to a Supreme Court of Appeal ruling, at least they are now forced to be a lot more transparent about it, she says.

The bad news: The Supreme Court of Appeal (SCA) concluded in a judgment handed down last week that the National Credit Act (NCA) does not prohibit banks from financing an agreement which includes that add-on charge.

The good news: The dealerships no longer get to thumbsuck an amount – R5,000 to R6, 000 on average - without disclosing how it was arrived at.

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Knowler explains that the National Credit Regulator has since 2017 been arguing that the Act does not make provision for an on the road fee, admin fee or handling fee to be added to credit agreements. However in early 2023, a Pretoria high court judgment endorsed the addition of the OTR fees to car finance deals.

During last week's SCA ruling (addressing three separate cases), Justice Tati Makgoka said it is clear that there was 'a lack of clarity regarding these fees', which, in turn, led to a lack of transparency.

“Credit providers earn interest income from financing deferred amounts for the duration of credit agreements, which usually range from 60 to 72 months. A seemingly small amount of OTR fees deferred with interest over this period could generate substantial profits for a credit provider.”

Justice Tati Makgopa

And in reality, of course, consumers are being offered 84-month deals now, with Nedbank even offering 96-month finance agreements (EIGHT YEARS!).

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In most cases, Knowler says, dealerships add the OTR fee to the offer-to-purchase agreement without any discussion, and no breakdown of how the fee was arrived at (unless you demand it).

"This is why, in the absence of a legal ban on adding OTR fees to a finance agreement, the SCA’s requirement that it all be properly spelt out is a welcome consolation."

Wendy Knowler, Consumer Journalist

She's hopeful that this forced transparency increases the percentage of car buyers who push back and negotiate a lower fee.

Scroll up to the audio player to hear more from Knowler