As we enter the third year of the COVID-19 pandemic in Australia, many will be reflecting on the experiences of the past two years when facing major purchasing decisions. In particular in deciding whether or not to purchase a new car with motor vehicle finance at this time. Businesses in particular have faced major disruptions and changed trading conditions due to the impacts of the pandemic. Some run off their feet while others have been forced to close or reduce operating capacity of trading hours.
Many businesses will be wondering what 2022 and beyond may hold for them and whether or not they should proceed with new vehicle purchases at this time or just hold tight until the situation becomes more certain. Individuals planning to buy a new car soon may also be weighing up their personal circumstances against the backdrop of the past few years.
While many contemplate, deliberate and procrastinate, there are a lot of solid reasons why it could be smart to make the move to purchase a new car with motor vehicle finance sooner rather than later. At Jade Car Loans we stay across a range of issues which effect the motor vehicle market as well as the finance sector and we present our reasoning around why now could be the time to buy.
Motor Vehicle Finance Interest Rates
When it comes to personal or business finance don’t let complacency creep into your decision-making. Lending rates have been at historic low levels since the RBA cut the cash rate to 0.1% in November 2020. But what goes down will eventually go up.
The RBA has consistently put a 2024 possibly 2023 timeframe on any rise in the cash rate. Though Governor Philip Lowe has said it is more around the conditions being right rather than an actual time or date.
Recently those indicators have started to move. Inflation increased in the December quarter and unemployment is continuing to fall. Both are key indicators for RBA to increase interest rates. The target for inflation is 2-3% sustained and unemployment around or below 4%.
But some analysts are tipping a rate rise sooner than 2024, some saying it could even come this year. When the RBA moves and increases or decreases the cash rate, it has a flow-on effect across the lending market.
The amount that lenders will change their own rates when the cash rate changes will depend on the individual lender circumstances. But those considering car finance should be aware that even a very small change can add up over the loan term.
When the interest rate on a specific loan increases by even a small percentage point that can calculate through to a significant addition to the total cost of the loan. This is one of the key reasons why at Jade Car Loans, we focus on achieving cheaper interest rates at all times.
To see exactly what we mean, use our Car Loan Calculators for businesses. Leave all data constant but change the interest rate by small increments and see how that affects the repayment estimate displayed.
So securing motor vehicle finance now or shortly, while rates are low, makes sense.
Securing Vehicles Now
Delays in new vehicle availability is tipped to continue for some makes and models into next year. The microprocessor shortage is continuing to impact vehicle manufacturers globally.
In addition, many factories are reportedly facing disruptions due to staff shortages as a result of the pandemic.
It is now widely reported that the pandemic will continue to impact globally until a greater percentage of the population is vaccinated. Many countries do not have the same high vaccination rates as Australia.
Some manufacturers have been launching new models and new stock into the market but there are still reports of buyers being advised of months in delay to take delivery.
Wait a few months and that delay could cost more in finance IF the RBA does make a move on rates.
Buying Considerations
Another key consideration to purchase a new car sooner rather than later is availability with delays tipped to continue.
Buying a new car, consider availability as a priority rather than the preferred vehicle. Dealers love advertising ‘driveaway’ pricing but the bigger issue could be what can buyers actually drive away in today?
This could be the time to be more open-minded to other makes and models rather than fixating on a favourite car. If you plan to wait until the new vehicle you want is in stock, interest rates may have gone up.
With new cars harder to secure, many have been turning to the used car market over the past two years. That spike in demand has caused a surge in prices for many second-hand vehicles. While there are many good quality second hand vehicles on the market, paying too high a price can never be a good thing. The real hit may not be realised until resale time. Insurance on a used vehicle can be higher than for a new vehicle.
Business car financing rates and loan conditions on used business car finance can differ from that offered on brand new vehicles. A higher rate may be charged which could add to the cost of the loan in total.
So buying used because new is not available, may not, in all circumstances, be a cost-effective decision.
Investment Incentives
For business buyers there is also temporary full expensing to keep in mind. While it is on offer until June 2023, if you would like to claim the tax deduction in this financial year, moving on your vehicle purchasing plans soon, could be a smart idea.
With all these issues in play, moving sooner rather than later on car purchase and finance plans may deliver handy savings. To discuss the motor vehicle finance options available to you, speak with one of our consultants.
Contact Jade Car Loans on 1300 000 003 for a Chattel Mortgage quote.
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.
