If you buy a car on finance, you must repay the bank even if the vehicle later turns out to be defective or the dealer allegedly misled you.
A recent High Court ruling underscores a critical point often overlooked by consumers: the finance agreement with the bank and the sale agreement with the dealer are two separate contracts.
If there’s a problem with the vehicle, your recourse lies with the dealer under the Consumer Protection Act (CPA), not with the bank that financed it. Unless the bank has ceded its rights or acted as the supplier, you’re still bound by the credit agreement – and required to repay the loan.
In October, the High Court in Johannesburg granted summary judgment in favour of Absa Bank against Busisiwe Eutricia Baloyi. Acting Judge W Domingo ruled that Absa had an enforceable claim based on a written credit agreement and that Baloyi’s defence – grounded in alleged misrepresentation by the dealer – had no legal basis against the bank.
Absa sought to cancel the credit agreement and recover the financed vehicle, while postponing the damages claim sine die until the vehicle’s sale and the final calculation of any shortfall.
Baloyi, who represented herself in court, opposed the application. On the day of the hearing, she confirmed that she had chosen not to appoint legal counsel.
A car loan that never got off the ground
Baloyi bought a 2021 Nissan Magnite 1.0T Acenta Plus CVT from CMH Group Midrand in August 2023, financed through an Absa instalment sale agreement. The deal required her to pay R6 827.49 a month from September 2023 to August 2029.
But according to Absa, not a single payment was made. Every debit order bounced. By January 2025, the arrears stood at R127 195.05, with a total balance of R597 344.53.
When Absa sued to recover the car and enforce payment, Baloyi responded with a plea that, the bank argued, failed to comply with Rule 22 of the Uniform Rules of Court. Her plea did not properly admit, deny, or explain the factual allegations – meaning, in legal terms, that they were deemed admitted.
Absa therefore applied for summary judgment under Rule 32, seeking cancellation of the contract, repossession of the car, postponement of its damages claim, and legal costs.
Baloyi’s defence: ‘I was misled by the dealership’
Baloyi insisted she should not have to repay the loan because the dealership had acted dishonestly and the vehicle was defective. She said she returned the car only three days after taking delivery, yet CMH Group refused to refund Absa.
Her arguments included:
- The dealer breached the CPA by failing to disclose that the vehicle had been in an accident.
- The dealership kept both the car and the money paid by Absa.
- Absa should have recovered the money from the dealership instead of demanding payment from her.
- The Gauteng Consumer Protection Authority told her Absa had already retrieved the car.
- She had lodged cases with both the Motor Industry Ombudsman (MIOSA) and the National Consumer Commission (NCC) and wanted the court to wait for their outcomes.
- Absa failed to serve a proper section 129 notice under the National Credit Act.
- Absa was negligent for not verifying the car’s condition before approving the finance.
Absa’s response: ‘We financed the car – we didn’t sell it’
Absa’s legal team countered that Baloyi’s quarrel was with the dealer, not the bank. The bank merely financed the transaction – it did not market, sell, or deliver the car.
Absa referred to the earlier decision in MFC (a division of Nedbank Ltd) v Botha (2013), where the High Court held that a financier is not the “supplier” under the CPA. The CPA regulates the relationship between consumers and suppliers – not between consumers and credit providers.
Absa highlighted key facts and documents to support its position:
- Baloyi signed a release note and acknowledgment of delivery, confirming she accepted the car.
- The instalment sale agreement contained a disclaimer stating that the bank made no warranties regarding the car’s condition, and any defect-related claims must be taken up with the supplier.
- MIOSA had already dismissed Baloyi’s complaints twice, finding no evidence that the sale was conditional on the car being “accident-free”.
- Absa also pointed out that Baloyi’s pending NCC complaint had no bearing on the High Court matter, which dealt solely with enforcing the credit agreement, not resolving consumer disputes about product quality.
The Court’s reasoning
Domingo AJ found in favour of Absa. Drawing heavily on the MFC precedent, she reiterated that the bank’s role is limited to providing finance, not to supplying or guaranteeing the quality of the car.
Both Absa and Baloyi were “consumers” in terms of the CPA, the judge said, while CMH Group Midrand was the “supplier”. Any alleged fraud, misrepresentation, or non-disclosure of defects fell strictly within the buyer-seller relationship – not between the buyer and the bank.
The Court also emphasised that Baloyi’s return of the vehicle was not lawful. Under section 52 of the CPA, a financed car can only be validly returned if:
- the bank cedes its CPA rights as “consumer” to the buyer, allowing her to return the vehicle for a refund, or
- the bank itself enforces its CPA rights against the dealer and passes any refund on to the buyer.
Neither condition had been met.
As for the NCA issue, the judge found that Absa had properly served the section 129 notice and that Baloyi had been informed of her rights.
The outcome
Domingo AJ found Absa’s claim to be “clear and enforceable” and Baloyi’s defence “void of any legal foundation”.
“The defendant’s defence is not good in law against the plaintiff because the crux of the defendant’s defence lay against the dealership and not the plaintiff.”
The Court therefore granted summary judgment in Absa’s favour, cancelled the credit agreement, and authorised repossession of the Nissan Magnite.
The judge postponed Absa’s damages claim of R599 083 plus interest at 13.45% (less the vehicle’s salvage value) sine die and ordered Baloyi to pay costs on the attorney-and-client scale.
Patrick Bracher, director at Norton Rose Fulbright, says the object of section 5(2)(d) of the CPA, which provides that the goods or services subject to the credit agreement are not excluded from the ambit of the CPA, is to preserve the consumer’s statutory protection against the dealer.
“The defence against the bank therefore failed and cancellation and return of the vehicle was ordered.”
Please click here to download the judgment.
