With the supply of new cars increasing with the easing of global supply issues as noted by the FCAI, the options and prospects of buying that new vehicle are finally improving. But there have been a number of developments over the past year which may make the price tag of that long-awaited vehicle a lot higher than buyers had planned for. As a result, the key focus for many buyers turns to sourcing the cheapest car loan to ensure the purchase is affordable.
With inflation soaring both here and overseas and due to other issues in the manufacturing process, many buyers may find new models arriving in Australia with a price hike. Also on the rise this year have been interest rates. The Reserve Bank of Australia has increased the cash rate by 3% over 8 rate rises. Rises which have potential to flow through to increases in lending markets including motor vehicle finance.
With interest rate and price rises, car finance becomes more important and new car buyers may benefit by knowing how to go about getting the cheapest car loan. As specialists in motor vehicle finance, we share the information that new car buyers need to know.
Defining the cheapest car loan can be seen from a few perspectives. It can be the interest rate which of course directly affects the repayments and the total cost of the loan. But ‘cheapest’ for some buyers may mean sourcing the lowest monthly loan repayments. We address the ways that both of these objectives can be addressed.
Types of Car Loans
The types of loans for cars and relatively universal across the lending sector. The Secured Car Financing will be the most suitable loan type for private buyers of new cars and many used cars. Business buyers have the choice of a number of commercial car finance.
With a secured loan, the vehicle is accepted by the bank or finance company as the security or guarantee against the finance. In the case of some used cars that are not seen by the lender as acceptable security, and Unsecured Personal Loan may be considered. But in this discussion, we’re focussing primarily on loans for new cars.
What to look for with Lenders
The motor vehicle finance market is very large with many manufacturers, through their dealers, joining banks and finance companies as well as finance brokers like ourselves to offer car loans.
While the Secured Car Loan is generally universal in its format and major features, there can be variations across different lenders. These variations may be in the approach taken and guidelines around negotiating on interest rates, the loan conditions, loan amount they will approve and the actual interest rate.
Navigating through the many options and identifying the nuances and differences can be challenging and very time-consuming. Buyers can eliminate that hassle by using services such as those of Jade Car Loans to handle the entire finance process.
Our broker-style lending services are available to all new car buyers – both private and business. This includes buyers of the smallest, lowest-price tag new vehicle right up to a top of the range model. So private buyers should not be put off from using our services and taking advantage of the benefits of having a professional source and negotiate the cheapest car loan option for you. Even first car buyers and first time loan applicants can use these services.
What to look for with Interest Rates
Interest rates are key to the cheapest car loan. Private buyers should compare Comparison Rates as well as Advertised Rates to make an informed decision. The Comparison Rate is the interest rate on a specific car loan example after some of the fees and charges have been included. As can be seen from our business vehicle financing interest rates, rates can vary across the market.
Note especially how those rate variations can play out in higher monthly loan repayments. They also add up in the total interest payable on the loan which effectively adds to the purchase price to represent the actual cost of the vehicle.
One warning is to avoid promotional offers for 0% interest rate loans. These are usually in the ‘too good to be true’ category. That zero interest usually only lasts for a short time after which a much higher rate will apply. If attracted to these types of ads, read the fine print and at least call us to discuss what we can offer.
How Interest Rates are Set and Offered
Car loan interest rates vary across the lending market because lenders set their rates based on their own practices and guidelines. Specialists in the sector such as ourselves, can choose to offer lower rates to be more competitive. When RBA decisions are made in regard to increases in the cash rates, it is up to individual lenders as to when and by how much they may increase their rates.
Lenders tend to advertise their lowest possible interest rate. That will apply for new car purchases and for loan applicants that have a good credit profile or score. The interest rate offered by a lender will be determined by an assessment of the individual application. This can mean that two individuals can apply for a car loan from the same lender for exactly the same car and be offered different interest rates.
In order to be offered the best rate, applicants should be mindful of maintaining a good credit profile. There are useful resources available to assist with addressing any problems.
Applications are also assessed in regard to the ability for the individual to repay the loan. This is made by lender reviewing the applicant’s balance sheet – what they owe and what they own, and ongoing expenses. To present a better balance sheet, applicants can consider paying off any other loans before applying for a new car loan.
How to keep repayments reasonable
If cheapest for a buyer means the lowest possible repayments, a few other strategies can be taken in addition to sourcing the lowest interest rate. The monthly repayment is calculated with the interest rate, the total amount of the loan and the number of years of the loan. Varying any of these elements can change the monthly repayment.
So if the new car has a higher price tag than expected, consider making a higher deposit to reduce the amount required for the loan or requesting a longer loan term. Both of those will reduce the monthly repayment.
In regard to loan terms, be mindful that lenders will have a say in the maximum terms they will approve. Also note that a longer loan term can result in a higher total interest payable.
The prospects of securing the cheapest car loan can be a realistic possibility for many new car buyers and may go a long way to countering the effects of price and rate rises.
Contact Jade Car Loans 1300 000 003 for a quote on the cheapest car loan for a new car purchase.
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.