When seeking to buy a new car most buyers will have a price range that they are targeting. This may be based on need, budget or personal choice. However, assessing the affordability of a vehicle based solely on the dealer’s price tag may be misreading the situation. Unless of course, you are a cash buyer. If, like many car buyers, you intend to purchase the vehicle with finance, then the more relevant figure to consider may be the monthly loan repayment on the car loan.
The monthly payment is the amount that will impact your household budget or business cash flow and for many buyers is the key to vehicle affordability. Jade Car Loans shares our expertise to outline what buyers should be considering when seeking lower car loan repayments.
The Rate Effect
Car loans have several cost components. Lenders will include their fees which can vary across the lender market. But the most significant ‘cost’ will be the interest charged on the loan. Lenders will charge interest on the loan over the loan term based on the interest rate applicable to the type of loan.
Lenders calculate their rates with several inputs including the official cash rate as set by the RBA, their interest in being competitive in a certain lending market such as motor vehicles and their business costs and costs of acquiring their funds to lend.
The motor vehicle lending market is highly competitive with many banks, non-bank lenders, car dealers and broker-lenders such as Jade Car Loans actively vying for business. Comparing interest rates across the market can be confusing so we have provided business car repayment calculators to assist our customers.
Note that interest rates on consumer goods are always higher than interest rates for business goods. So make sure you are looking at the appropriate rate. Most lenders will advertise interest rates for new cars unless they specify differently.
With business vehicle finance, the interest rates vary for Chattel Mortgage, Leasing and Commercial Hire Purchase. Businesses typically assess the other features and benefits of each loan type rather than making a product decision based purely on the interest rate.
Jade Car Loans provides both personal and business vehicle finance at fixed interest rates. This means that once a finance deal is agreed and finalised, the monthly repayment will stay the same at that interest rate over the full term of the loan.
The total interest payable on a car loan is calculated over time. The ‘time’ is the term of the loan, the number of months of repayments. Jade Car Loans offers terms of up to 7 years for car finance subject to lender guidelines and other approvals.
- The longer the car loan term, the lower the monthly repayments but the more interest payable over the complete loan term.
- The shorter the finance term, the higher the monthly repayments will be but less total interest will be payable.
Before embarking on sourcing a car loan, buyers are advised to have a target monthly repayment in mind to discuss with their lender. Arriving at this figure may require reviewing the household or individual budget regarding regular recurring expenses or the business cash flow moving forward. The repayments will be in place for the full term of the loan, so looking ahead regarding money management is important. Are you anticipating receiving a pay/income increase over that time?
Additional payments can be made with our Secured Car Loans. This means if you do come into extra income, you can make extra payments in addition to the scheduled monthly payments. This would shorten the term and reduce the total interest payable. Break fees may be applicable if this occurs.
Business Vehicle ‘Balloon’ Factor
Business buyers have the extra option of including a ‘balloon’ component in the finance deal which can be used effectively to reduce the monthly repayments. This is a portion of the loan amount that is set aside for payment at the end of the loan term.
A good tip is to be mindful of not having a balloon that exceeds the value of the vehicle at that time. If trading in or reselling a vehicle, you may not get sufficient to repay the balloon.
Lenders do have guidelines around the percentage of balloons that they will permit. Your Jade consultant will negotiate on your behalf with our lenders to secure the preferred balloon that delivers the desired repayment amount.
Using a Car Loan Calculator
To see how interest rates and loan terms work together to determine the monthly repayments, simply use our Car Loan Calculator. By varying either or both components, you can immediately see how the repayment estimate changes. Be mindful that not all fees will be included and any offer made to you may vary.
You can also see how if you change the loan amount, the repayment changes. This brings into consideration the possibility of paying an upfront cash deposit to reduce the amount you are borrowing. This too would reduce the repayments.
Securing a ‘Goldilocks’ Repayment
Some repayments are too high, some too low. So buyers are seeking the ‘Goldilocks’ level, the one that is just right. When considering business car loan rates, this may require negotiating with the bank or lender, a process that can be tricky for borrowers to approach on their own.
Lenders do have guidelines that they apply to loan applications, some of which are very strict. Some may be set by their organisation and some are set in law. Under Australian Consumer Law, licensed credit providers such as Jade, banks and other lenders, must abide by certain regulations.
Using a broker such as Jade Car Loans can be of great assistance to achieve the car loan repayment that suits your budget or your business cash flow. We utilise our negotiating power with our large lender base to secure the best outcome for our customers.
So when starting on a car buying journey, keep our loan calculator handy on your phone so you can quickly convert the selling price to those more relatable loan repayments.
Contact Jade Car Loans at 1300 000 003 to discuss achieving your target car loan repayment deal.
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.