The Pawn and Drive or Pawn your car and still Drive it or LendnDrive market has been in existence in South Africa for nearly 10 years. In the UK and the USA, it’s been going for much longer. Probably 40 or 50 years. What makes this type of transaction so appealing to the borrower is the fact that he can access cash in the form of a loan and yet he can still drive and have access to his car. This a game changer for most people who only have one car and need it to work and look after kids and family.
What makes this type of transaction so appealing to the borrower is the fact that he can access cash in the form of a loan and yet he can still drive and have access to his car. This a game changer for most people who only have one car and need it to work and look after kids and family. The problem with this type of transaction for the lender is its extremely high risk. He is now giving the surety or collateral back to the person whom he lent money to. So although he most likely
will take title to the vehicle like a WesBank-type institution would, it still is very risky, as the car he is loaning money against is typically not new or in warranty. This means that during the period of the loan, there is a high risk that the vehicle might be severely damaged and neglected due to minimal maintenance and be worth very little if it were ever repossessed. This, coupled with the fact that the vehicle could be sold without its papers or sold as scrap or moved across the border, means this is a VERY risky transaction. And, at the end of it, the borrower could owe the lender a significant amount of arrears which he will never recover.
So, the bottom line is that companies that offer a Pawn and drive deal charge a high monthly fee to offset the risk. It is a loan that isn’t there for long-term use. It should be used as a short-term solution and almost a bridging loan until you can find cheaper alternatives. To conclude, the Pawn and drive model is here to stay and compared to the Pawn model, where you must leave your vehicle in storage, it does hold incredible benefits. Please try and find a Lender that checks your affordability and that checks the value of the loan to make sure you can afford such an expensive loan. Make sure you pay timeously as this type of lender must recover his asset quickly if you don’t pay, as his risk becomes exponential the longer he leaves the debt to run. Please check out First Advance Services and have peace of mind that we are the Company that tells you exactly what you are getting into and will always act professionally to ensure there are
no grey areas.
