When in the market for a new car, most buyers will wisely compare the various makes and models available that meet their criteria. They usually know what they want in a vehicle and therefore what to look for and what questions to ask of the dealer. But as sourcing finance is not something that everyone needs to do on a regular basis, buyers may not be as knowledgeable about what to do when comparing car loans.
The Australian motor vehicle lending market is one of the largest sectors in the finance industry and can be extremely competitive. When comparing car loans to source the cheapest and most suitable offer, buyers should have a good understanding of lenders, interest rates and loan types and take advantage of the resources available to them.
Understand the Lending Market
The motor vehicle lending market consists of banks, non-bank lenders such as finance companies, dealer finance and finance brokers such as Jade Car Loans. While there are some standard processes and practices across the market and uniformity around loan types, lenders will have their own individual guidelines and approaches to assessing loan applications and arriving at a finance offer.
- Banks are the traditional and long-standing lenders for all types of loans but can have strict guidelines they must adhere to and are not known for being negotiable on interest rates or loan conditions.
- Large finance companies, while not holding banking status, can operate similarly to the major banks but may have some flexibility in regards to conditions.
- Non-bank lenders can include specialist lenders operating primarily through brokers and offering business finance rather than consumer car loans. They are known for have greater flexibility and being more negotiable on interest rates and loan structure.
- Dealer finance for new cars is often through the manufacturer’s finance arm.
- Used car dealer finance is usually through an arrangement between the dealer and a finance company.
- Dealer finance is typically provided to capture buyers at the initial test drive stage so as not to lose them and a sale if they need to leave to sort their loan. Seen as a convenience by many, but it can be worth checking other offers from other sources.
- Finance brokers such as Jade Car Loans have accreditation with multiple lenders and can quickly assess a large section of the market to source the most suitable and cheapest offer for buyers. Brokers handle negotiations and arrangements on behalf of buyers to save time and achieve the cheapest offer.
Lenders can specialise in either business or consumer car loans or they may offer both. Some lenders may specialise only in motor vehicle finance while others will have an interest in multiple lending sectors.
Take a Keen Interest in Interest Rates
The interest rate is the major cost of borrowing money and those taking on a car loan should take an interest in interest rates. The RBA sets the official cash rate which forms essentially a basis or starting point from which lenders then set their own rates for different loan sectors.
A small variation in the percentage of the interest rate offered on a loan can mean a significant difference in total interest when calculated over the full term of a loan. So achieving the cheapest interest rate is a major objective for astute buyers.
Car loans can have fixed or variable interest rates depending on the lender and the type of loan. A fixed rate means the rate will stay the same over the full term of the loan. A variable rate means the rate charged by the lender can change if and when the official cash rate or their individual rates change over time.
A Comparison Rate relates to consumer car loans and all lenders active in this sector are required under Consumer Law to display this rate along with their Interest Rate. The Comparison Rate refers to the interest rate on a specific car purchase when fees and charges have been factored in. The details of the specific example are noted in conjunction with the rate.
While commercial car loan rates will be advertised by lenders, this will, in most cases, be based on new goods (unless otherwise specified) for loan applicants with a good credit rating. Applicants can address issues with the credit profile prior to applying to improve their chances of a good rate offer.
Clearly Differentiate the Loan Types
There are distinct differences between the types of loans available for private consumer car purchases and for business vehicles.
Consumer car loans are the most commonly-used Secured Car Loan and an Unsecured Personal Loan. An unsecured loan may be sought where the vehicle is not suitable for or accepted as security against the loan.
Businesses have the choice of Chattel Mortgage, Lease and Commercial Hire Purchase. These finance types offer variations in regard to tax benefits, interest rate, accounting details and structure.
Pre-approved loans are available for all types of loans and are loans which are applied for and processed through to ‘approved’ stage prior to the buyer making a purchase commitment.
No deposit car loans are loans where 100% of the purchase price of the vehicle is included in the amount of the loan. These can be available on all types of loans depending on lender risk assessment of the applicant.
Utilise Freely Available Resources
Car buyers seeking to compare car loans can take advantage of Business Car Loan Calculators to work out the estimated repayments for different types of loans and vehicles. These calculators are extremely useful when comparing interest rates on different loans to see how the rate different rates relate to repayments.
Most car finance lenders will offer free quotes so buyers can get multiple offers in order to make informed decisions.
Cut through the Confusion
The motor vehicle finance market is large and competitive which can lead to confusion for some seeking a car loan. Jade Car Loans assists buyers by handling the entire loan sourcing, negotiating and arranging process on behalf of customers. We save people time, cut through the confusion and deliver better interest rate loans.
With our accreditation with multiple banks and lenders, we make the process of comparing car loans quick and simple.
Contact Jade Car Loans on 1300 000 003 for new car finance.
DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.
