End of financial year, start of financial year, tax time, budget time – no matter the time of year, it’s always the right time to upskill your financial knowledge if you’re buying a car. It’s an exciting experience and it’s easy to get carried away in the emotion or get caught up in the seller’s hype and lose sight of some of the basic realities of the situation.
At Jade Car Loans, we’re committed to educating our customers on as many aspects of the process as possible to instil confidence through knowledge. As always, this information is provided as general information only and should you feel you require advice specific to your circumstances, we advise you consult with a financial advisor.
In this article, we’re providing an explanation of some of the fees, charges, costs and other terms and expenses that you may come across, both in regards to the car purchase and when working with your Jade Car Loans consultant in arranging your car loan.
There are differences between car loans for personal cars (consumer finance) and finance for purchasing business vehicles. In this blog we’re looking specifically at consumer car loans, ie cars purchased for private use.
Car Loan Elements
When organising a car loan you have the principal which is the amount you want to borrow, the interest charged on the loan and a number of other fees and charges. Individual lenders vary in the amounts of these fees and charges so we can’t quote specific figures. When sourcing your car loan offer, your Jade consultant will be negotiating not only the cheapest interest rate but also the best deal in respect to all other charges. If you are sourcing loan quotes yourself, make sure you ask for an itemised quote so you can clearly see what fees and charges are included.
- Interest: we refer you to our webpage on comparing interest rates and comparison interest rates for a full explainer on actual interest rates. In regard to how interest rate is charged on consumer loans, it is based on the Consumer Credit Code Act. This requires that interest must be calculated on a daily rate on the daily balance and charged to the loan monthly.
- Loan Establishment Fee: most lenders will charge a fee for establishing your loan. This is standard practice and often referred to as a Loan Application fee.
- Monthly Fees: a monthly service fee may be charged by the lender and factored into your repayments.
- Default/Missed Payment Charges: if you miss a payment or ‘default’ the lender has the option to charge a fee.
- Break Fees: this is the fee charged if you pay out your loan before the end of the loan term. For Secured Personal Car Loans the break fees are minimal. On Unsecured Loans there are usually no break fees.
- Other Fees and Charges: usually the above are all that would be included in a standard personal car loan contract. However, it is always advisable to read the terms and conditions of your loan contract and check the quote to ensure there are no hidden charges.
Using a finance broker – Jade Car Loans – means we are working in your best interests to source you the best car loan and your consultant will explain all the elements of your loan. If you are sourcing your loan yourself, it is your responsibility to understand what you are signing up for.
Car Purchase Costs
When buying a car, whether new or second-hand, there will likely be additional charges above the advertised price. Here’s a quick rundown on a few to consider:
- Stamp duty: usually payable on new cars and may vary from state to state.
- Dealer delivery charges/on road costs: this phrase always accompanies the price advertised for new cars and covers the dealer’s costs to prepare your car for delivery. They can be significant and you should check all costs when they provide you with a written quote. Used cars purchased through a dealer may not include such costs. These costs are not applicable when buying a used car from a private seller.
- Registration: when buying a new car it has to be registered and this is charged by the dealer on top of the advertised purchase price. Rego is state-based charged and varies from state to state. You should be able to check your state transport department for rego costs. If buying a used car you will have to pay to transfer the registration from the seller to yourself.
- Auction costs: if buying a vehicle at auction the auction houses charge a fee on top of your winning bid price. The auction house should display their fees on the website.
- Insurance: there are 2 types of insurance – Compulsory Third Party Insurance (known as a green slip in some states) which cover any damage your vehicle does to other people, but not yourself. This is compulsory and varies on the price of the car and from insurer to insurer. Comprehensive Insurance is a full insurance policy and the cost will vary from insurer to insurer so it is worth getting quotes. If you have a car loan, the lender will likely require you take out a Comprehensive Insurance Policy.
- Accessories insurance: often a car dealership may encourage you to take out additional policies such as tyre and rim protection policies. We advise you read up on these as many consumer authorities including the Australian Government Moneysmart website advise that these are not value for money.
What costs are included in your car loan repayments?
When your Jade consultant provides you with a quote for your car loan it will have taken into account the amount you want to borrow (price of the car), interest, loan establishment fees and any other fees charged by the lender. In most cases, the dealer deliver/on-road costs, if buying a new car, will be included in your vehicle price.
When it comes to registration, if you are buying from a dealer they will usually handle the registration and CTP and include it in your purchase price which means it is included in your car loan. But that also means you will be paying interest on those elements. You may choose to pay for those items separately, thus reducing the loan amount and avoid paying interest on those amounts.
For more information on fees, charges, interest and other costs, please read articles in our resource library and our webpages.
To discuss a cheap personal car loan, call Jade Car Loans 1300 000 003 and speak with one of our consultants.