Buying a new car can be a complicated process under normal conditions. It requires multiple considerations – selecting a vehicle to suit individual purpose, tossing up between competing makes, models and prices, buying new or used, working out affordability and for most, sorting out a car loan. But events on both the global and local scene have further complicated the car buying process for many purchases. The limited availability of certain makes and models on the Australian motor vehicle market and the predicted interest rate rises present new considerations for car buyers.
Primarily the consideration around when and what to buy. The famous line from the Kenny Rogers hit, “know when to hold ‘em, know when to fold ‘em” seems to capture the essence of the quandary. But purchasing a new vehicle with finance is certainly not a something to be gambled on. Buyers need access to reliable information and professional expert services in order to make fully-informed decisions on financial matters.
New car buyers may face the prospect of weighing up the choice of buying whatever car they can source now in the current low interest rate environment against delaying to get the car of their choice which could be at a time when rates may have increased.
To assist with these decisions, we elaborate and clarify some of the factors that buyers may consider and still achieve cheap motor finance.
Delays in Vehicle Availability
It’s not just affecting the motor vehicle industry in Australia, the microprocessor shortage is a global problem which is delaying production in multiple manufacturing sectors. A myriad of products require computer chips or their parts do. This shortage emerged as a result of a drought in Taiwan which is a major hub for computer chip manufacturers. Apparently, a lot of water is required in their manufacture. Adding to the woes of car dealers with order books bulging is shipping issues.
Many of the biggest vehicle manufacturers including Ford, Volkswagen and Toyota have experienced delays due to the computer chip shortage. Some experts are tipping that delays could persist for another year while some manufacturers have managed to get vehicles to market.
From a review of media announcements, it appears that some models may be impacted more than others. For buyers, it’s a matter of do you take the vehicle that the dealer has ready to go even if it is not 100% what you wanted? Or do you put your name on the waiting list for when that ideal vehicle is available to drive-away?
While that will be a personal choice the factor of price may influence the decision. There are reports of significant price hikes on some models so the cost of waiting could be significant. The other dollar factor is the change in the economic conditions in Australia which are pointing to a rise in interest rates highly likely during 2022.
When will interest rates rise?
The interest rate is the biggest factor in the overall cost of motor vehicle finance. Achieving the cheapest commercial car repayment interest rates is a major priority for most buyers and definitely the key focus at Jade Car Loans.
As we reported in our coverage of the RBA Board February meeting, there are very strong indications that there will be a rise in the official cash rate this year. Not in 2024 as previously indicated by the RBA.
When the RBA raises the cash rate, banks and lenders typically respond by raising their own rates in their different lending markets. By how much the RBA will raise rates and by how much some of our car loan lenders will raise rates is not known at this stage.
What is looking increasingly certain is that sourcing motor vehicle finance now will be cheaper in terms of interest rates than waiting until later in 2022. Another item to add to the car buying ‘buying beware’ list!
Calculating the Potential Cost of Postponing
To get a better idea of what any increase in the price of the vehicle you want or a rise in interest rates may impact your car loan, use our commercial Car Finance Calculator. It allows users to vary the loan amount (which can be the purchase price) as well as the interest rate and other data.
Keep the loan amount steady while increasing the interest rate to see possible variations in estimated repayments. Increase the loan amount to cover any possible price hike and interest rate to see the outcome if the purchase is delayed until after rates rise.
Getting the Cheapest Loan Regardless of Timing
It has been over 10 years since interest rates, specifically the official cash rate, were actually increased. So it probably should not come as too much of a surprise that they would have to go up at some stage. After all, the official cash rate is at the lowest it has ever been.
There is a way that car buyers can achieve the cheapest vehicle finance available regardless of rate rises or timing and that is by engaging our services to source the car loan. As a finance broker style lender, we are ideally positioned with accreditation with multiple lenders to always source the cheapest loan for our customers.
Regardless of what is happening in the financial markets or the motor vehicle markets, we focus solely on negotiating the cheapest interest rate loan.
Talk with Jade Car Loans on 1300 000 003 for how we can source you the cheapest car loan
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.