A new Supreme Court of Appeal judgment allows consumers to claim directly from banks when financed vehicles are defective
Katlego Sekhu
A recent Supreme Court of Appeal ruling has brought major relief to South African car buyers, confirming that consumers may hold banks accountable when financed vehicles turn out to be defective.
The decision follows earlier confusion following a ruling by the High Court involving Busisiwe Baloyi and Absa Bank, where the court found that the Consumer Protection Act did not apply to credit agreements. In that matter, Absa sued Baloyi and the judge ruled in favour of the bank, reinforcing the long-held position that consumers must continue paying instalments even if the vehicle is faulty.
However, on 10 December 2025, the Supreme Court of Appeal clarified the legal position.
The court ruled that where a financed vehicle is defective or misrepresented, the consumer does not have to continue paying the bank, and if payments have already been made, the bank must refund the consumer.
“This changes everything for car buyers,” said Trudie Broekmann, a consumer attorney. “If there is a defect in your car and the dealership misled you, or failed to disclose faults, those claims can now be taken directly to the bank.”
The court explained that vehicle finance involves two linked contracts. One exists between the consumer and the dealership, and the other between the consumer and the bank.
“When you finance a vehicle, the bank does not simply provide credit,” Broekmann explained. “The dealer acts as an agent, and the bank purchases the vehicle on behalf of the consumer. Ownership remains with the bank until the loan is fully repaid.”
In practical terms, this means the bank cannot argue that it is merely a credit provider.
“The bank owns the vehicle until you finish paying,” Broekmann said. “You pay monthly instalments towards the purchase price, and only once the agreement is settled does ownership transfer to you.”
Because of this structure, responsibility for defective vehicles now extends to the bank.
In one related case, Van Niekerk v FirstRand Bank, the court confirmed that consumers may pursue remedies directly against financial institutions when vehicles are faulty or when dealerships fail to disclose defects.
“This is a huge development for consumers in South Africa,” Broekmann said. “Banks are now squarely in the frame.”
Importantly, the bank involved has confirmed it will not appeal the ruling.
Broekmann is now advising consumers to consider financing vehicles, even partially, rather than paying cash.
“If you buy cash, you may struggle with the dealership, who could blame your driving or refer you to the Motor Industry Ombudsman,” she said. “But if the car is financed, you have a direct legal route through the bank.”
Given that this is new legal territory, consumers are encouraged to seek professional advice.
“Because this is fresh law, it is worthwhile getting a lawyer in your corner,” Broekmann added. “Speak to a consumer attorney. In many cases, it is as simple as emailing the judgment to the bank.”
Listen to the podcast to understand how this ruling could affect your next car purchase and what steps to take if you’re already dealing with a faulty vehicle.
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