An Assessment of Car Buyers’ Understanding of Balloon Payment Method in Relation to the National Credit Act in South Africa

Gloria Mothibi


The objectives of this study were to measure the extent to which first time car buyers understand the National Credit Act in relation to using balloon payment as a vehicle finance method, and explore the first time car buyers’ perceived extent to which balloon payment vehicle finance method is aligned with the provisions of the National Credit Act (Act No 34 of 2005). The study was driven by the observed reported continued loss of cars by some consumers as a result of failure to meet all provisions of balloon car financing contract. Based on simple random sampling approach, a self-administered standardized questionnaire was used to collect primary data from 71 Pretoria based respondents who had purchased motor vehicles using balloon financing method. Data was processed and analyzed using SPSS version 21 statistical program for windows. Based on the Cronbach’s alpha and Keiser-Meyer Olkin (KMO) measure of sampling adequacy (MSA) values, the research instrument’s items met the internal consistency and sampling adequacy requirements. The results on the frequencies and descriptive statistics indicate that first time car buyers who purchased cars using the balloon payment finance method did not understand the National Credit Act with respect to entering into a balloon payment contracts. Moreover, the respective car buyers perceived that the provisions contained in the balloon car loan plan were not aligned with the provisions of the National Credit Act.

Keywords: balloon payment, National Credit Act, first time car buyers, balloon contract

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ISSN (Paper)2224-3240 ISSN (Online)2224-3259

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