Credit scores from below average to Excellent

How to Improve your Credit Score

 

They know if you’ve been good or bad with your credit.  How? And who is ‘They’?

What is a credit report?

In basic terms a Credit Report is an overview of your financial history, specifically looking at how your conduct has been with loans and in turn how reputable you are with your creditors.  These reports are maintained by Credit Reporting Agencies.

What is on the report?

There is a fair amount of information about you on your credit file.  This can include:

Your personal information:  Full name, gender, current and previous residential addresses (up to 2) your date of birth, driver’s licence number and your current employers name.

  • Bankruptcies:  If you have filed for bankruptcy or had a court judgement against you to do with debt
  • Applications for credit: This will include any loans you have applied for in the past 5 years.  This will include loans, credit cards and store cards.
  • Business information:  Any business you own or are a director for
  • Number of credit inquiries:  When you apply for a loan, this is listed on your credit file even if you aren’t approved for the loan.  This will include applications for the past 5 years for loans, store cards and credit cards.
  • Current credit:  Any providers of finance you currently have credit with
  • Defaults:  If you have not paid an account or bill over $150 and it is more than 60 days overdue, this will appear as a default and remain on your credit report for 5 years, even after payment has been made on the default.
  • Overdue payments:  If the credit provider has been unable to locate you to demand a payment these are known as ‘clearouts’.  Clearouts remain on your credit report for 7 years.

Comprehensive Credit reporting

In the past, only negative data was stored on your credit file. In 2014 the Government introduced Comprehensive reporting that showed your good credit history as well.  It still includes any negative credit history but if you have good credit conduct, it shows on your credit file.

Credit scores

With the full view of your credit file, you will end up with a score.

Using Equifax scoring system (formerly known as Veda Advantage) your score will range between 0 (never had credit or had serious misconduct) to 1,200 being excellent.  The lower the score the MORE likely it is that the borrower will experience an adverse event that will harm their credit in the next 12 months.  The higher the score, the less likely it is.

 

These are the top 20% of borrowers in Australia.  These are the least likely (highly unlikely) to experience an adverse event that may harm their credit file in the next 12 months.

According to Equifax – people with a Very Good score are twice as likely as those with a score in the AVERAGE range to experience an adverse event that will harm their credit file in the next 12 months.

It stands to reason that consumers in this range are more likely to keep a clean credit report in the next 12 months and are less likely than average and below-average to experience an adverse event that will harm their credit file in the next 12 months

Consumers in this range are likely to experience an adverse event that will harm their credit file in the next 12 months.  These adverse events could include a default, bankruptcy or court judgement in the next 12 months.

Consumers in this range are highly likely to experience an adverse event that will harm their credit file in the next 12 months. Similar to average scores, this band of people are likely to experience a default, bankruptcy or court judgement in the next 12 months.

What if I have a bad credit score?

Some lenders will not lend to people with a score below a certain threshold.  This is why it is important to use a broker. A Good Broker will check your score first rather than just apply and hope for the best without affecting your credit file!

If your score is lower, a Good Broker knows where they can send the loan and who is likely to approve it based on all of your circumstances.  It's important to understand that if you have a bad credit score, it's not for no reason!  You may think that another loan is going to help you out of trouble, whereas budgeting and paying your existing bills on time of completely paid off should be your goal.

Seeking the assistance of a financial counsellor may be a great start for you if you are trapped in debt.

 

Things that affect your score positively

It seems simple but paying your bills on time or early in the full amount will positively affect your score.

Not applying for too many loans in a short period also assists along with keeping your debt to credit ratio as low as possible.  This could mean lowering your credit card balances/limits and also paying them off each month will help immensely.

Of course, regularly checking your credit file (at least once per year) to ensure there are no errors on your file is also really important.

Things that affect your score negatively

It stands to reason the opposite applies to positive conduct.  Missing payments, not paying bills in full or on time, maxing your credit limit, having court judgments or clearouts, making multiple credit applications in a short period of time are all things that can negatively affect your score.

Not checking your file regularly will also mean you don’t pick up on any errors that may be on your file, or even worse, ignoring errors or inaccurate entries on your file

Improving your score

Basically, using the recipe above to positively affect your credit score is a great start. It will take time but your score will gradually improve.

One of the biggest mistakes that people make when they get into trouble financially due to tough or unforeseen circumstances is not contacting their lender to talk about it.  Putting payment arrangements in place or even having a payment hold for a period could help you immensely and keep your relationship strong with your current lenders for when you exit the circumstances.

 

How to check your score

The first thing to do is run your credit file. You can get this for free through a variety of credit reporting agencies:

Equifax

https://www.equifax.com.au/personal/

Experian

http://www.experian.com.au/order-credit-report/

Illion

https://www.checkyourcredit.com.au/

If you find errors or inaccuracies, you should get in touch with the credit reporting agency to see if it can be rectified. Fixes can take time to appear on your file, so don't expect it to happen overnight.   Your broker will also be able to provide you some guidance in this regard.

Journey Finance credit check

Journey Finance as part of our process will run your credit score.  If you are looking for a loan, we can do this work for you and provide you this for as little as $19.95 or free if your loan goes through us.  Contact us today.

 

Disclaimer: The thoughts and opinions conveyed on this website are those of the author/s and are of a general nature. Any information provided does not constitute financial or general advice to you from Journey Finance Australia. When considering financial or insurance products, you should seek your own independent advice from a professional.

Get In Touch

1800 861 009

Locations

Melbourne

Brisbane

Sydney

Sunshine Coast

Townsville

Email

[email protected]


Happy employee

Why use a finance broker

 

Benefits of using a Finance Broker

There are quite a few benefits in using a finance broker.  In this fast-paced world with little time and lots of things grabbing your attention, it can be difficult to navigate finance, especially if you have no idea where to start.

Saves you time

A Brokers job is to shop around for you. Think of a broker as a personal shopper!

Imagine you are looking for a fridge to buy.  You do the research and you settle on a particular make and model.  The next job is to go from one retailer to another to get the best price.  That takes time and effort to save you potentially a few hundred dollars.  Now imagine if you had someone doing that for you!  You get a good deal AND you've saved a lot of time.

Brokers do that same thing, but with finance.  The primary role of a Broker is to shop around for you.  A broker has regular contact with the banking and finance industry and has knowledge of offers and great terms not offered to the general public.  Because a broker does all the legwork for you, it saves you time and energy!

Saves you money

As discussed, a Brokers role is to find you the best deal along with the right product that suits your personal circumstance. If you go to a bank direct, you are locked into their products.  It doesn't mean it's not fit for purpose, it's just that you have only looked at one shop, with one product.  No comparison!

  • Loan A may have a good rate with Big Bank Mutual, but it has restrictive terms and conditions such as termination fees or a lack of ability to pay extra.
  • Loan B may have all the good terms you want, but the rate isn’t as sharp.

A Broker will ask you what you need in a loan.  Or if you haven't got a clue they will tell you the things to look for in a loan, tell you what is in the marketplace and guide you to the best fit overall to your needs.

The goal is to keep your repayments as low as possible as well as having flexible terms and policies.  A broker will do that for you with access to potentially dozens of lenders all competing for your business.

Fees, charges and policies are part and parcel of a loan, and a good broker will outline the fees so you know what you are signing up for with no surprises.

Makes you smarter

Have you ever been involved in a conversation about finance and didn't understand what they were talking about?  Amortisation, equity, defaults, credit scores, loan portability, fixed rates etc etc.  You may have just nodded your head not understanding a word!

A good Broker in interaction with clients will give the ‘inside secrets’ and even provide you with education about how loans work, the tricks, the traps, and the best way to secure the best deal.  They will answer questions you may have had for years.  Brokers LOVE talking finance.  Remember, they aren't selling a product, they are providing a service!

Good Brokers also have developed lots of information tools (like this one!) that can help you navigate the world of finance.

A good Broker won't talk AT you, they will put things in ways that are easily understood and are relatable to you. This is important as finance can be complex, so having a person in your corner helping you 'join the dots' is great. This will also help you in the future when you are making other financial decisions.

As a result at your next family get-together or Friday afternoon drinks, you can be the expert, or at least keep up with the conversation!

 

Saves you confusion, heartache and regret

We see it all the time.  People who shop around for finance not understanding that the lender is putting a hit on their credit file, negatively affecting the most precious commodity when it comes to financing, the credit score.

A good Broker will never put a hit on your file until you are ready to apply.  A good Broker will find out all about you and your circumstances and complete a ‘soft enquiry’ that doesn’t touch your file but just looks at your credit score to know which lender will be best suited.

Once the shine comes off the purchase, the loan is there for the long-term.  Avoiding regret and buyers remorse because you didn't understand or were sold a product is so important to your long term happiness!

 

You get an expert

Brokers are finance specialists, they access finance for everyday people - 365 days a year.

A good Broker should know the intricacies of lenders, their nuances, policies, fees and charges and how to best approach an application.  Having an expert in your corner who assists hundreds of clients every year with a specialist skillset will give you an advantage in your next finance decision.

It can also prevent mistakes and make the overall buying process of a new or second-hand car, boat, caravan or motorbike far more enjoyable.

You are getting impartial advice

Brokers are governed by legislation that dictates their behaviours.  A good Broker (notwithstanding the law) will have your best interests as their North Star.  They work for you.

The difference between a Broker and banks is bank staff are simply selling you their product. They can’t then go and provide you a comparison to a competitor because they work for Big Bank Mutual.  A good Broker will not be impartial to one lender, they will hunt the best deal from the multiple lenders they have access to.  Again, good Brokers do not sell ‘products’, they sell service.

You get a real person

Brokers are usually not huge corporations.  Most good Brokers are small business owners and are driven by good customer service and creating long term relationships with their customers.

Everyone has heard the adage banks tend to treat customers like numbers. People don't like being treated like a number. They want to be treated like a person.  A good Broker will be the person you deal with all the way through the process and into the future and actually care about your financial well being.

Final thoughts

We’ve come up with this list, and there are many more reasons to use a good Broker like Journey Finance.  To truly understand how a good Broker can benefit you, contact us today.

Disclaimer: The thoughts and opinions conveyed on this website are those of the author/s and are of a general nature. Any information provided does not constitute financial or general advice to you from Journey Finance Australia. When considering financial or insurance products, you should seek your own independent advice from a professional.

 

Get In Touch

1800 861 009

 

Locations

Melbourne

Brisbane

Sydney

Sunshine Coast

Townsville

Email

[email protected]

Hours

Mon:10am - 5pm
Tue: 9am - 5pm
Wed: 9am - 5pm
Thur: 9am - 5pm
Fri: 9am - 3pm
Sat: 8am - 1pm
Sun: Closed

 


Credit scores

How do credit scores work?

 

How do credit scores work?

Borrowing money to buy things like houses and cars means you are taking on significant debt to acquire items for your life.

For the initiated, when you take a loan out for an asset, the lender adds interest to the loan which is an amount above the amount you borrowed as a fee for lending the money.

It’s like borrowing a car with half a tank of fuel, when you return it, you will fill the tank up.

Lenders of money such as banks, building societies, credit unions or non-traditional lenders take on risk to extend the loan to you.  The risks could include:

  • You may pay the loan back late
  • You may default on the repayments (not pay at all)
  • Your circumstances may change
  • You may lose your job or ability to pay
  • The market conditions may change

How are interest rates determined?

Without getting into too technical an explanation, the ‘cash rate’ is set by the Reserve Bank of Australia.  They meet each month and their role is to assist the overall economy to provide the growth needed to make everyday Australians lives better.

The Reserve Bank doesn’t lend money to you and me, nor does it have branches or ATMs, but the Reserve Bank looks at what is happening in the economy and adjusts ‘monetary policy’ in accordance with those things.

For example, if inflation is too high (prices are going up too fast or not at pace with wages) the Reserve Bank will adjust up the Cash Rate (% it lends money to banks) to slow our spending. (we spend more on mortgage repayments)

Alternatively, if inflation is too low it usually means there is not enough spending going on, so interest rates are lowered in order to stimulate spending in the general economy

There are many factors that determine the Cash Rate

  • Unemployment rate
  • Inflation
  • Wage growth
  • The Australian dollar (value against other currencies around the world)
  • Australian household debt
  • The Consumer Confidence Index

The RBA meets each month to look at a target of inflation of around 2-3%.  They will look at everything from what a litre of milk costs to the price of petrol to see what is happening in the economy broadly.  It then sets that months monetary policy accordingly (as talked about above)

In the 1980’s, Australia’s banking industry was deregulated meaning the government has less control and the market began to manage itself.  In theory, this creates competition and drives up the quality of service delivered as well as innovation. The RBA was no longer government-controlled and acts independently of the Government.

What has this got to do with credit scores?

Now we know how interest rates are set, we can start to understand how those rates are then passed onto to us the consumer.

We’ve already talked about risk.  This is a big factor.

Think about it this way.  If you had $100 to lend out and you had 3 applicants.

 

Applicant 1: 

Has been in a job for 3 years full-time.  Has a mortgage they are up-to-date on payments and never missed a payment.  They have a car loan also up-to-date with excellent conduct on the loan.  They save every pay and don’t spend more than they earn.  They have an emergency credit card with a $1,000 limit.

Applicant 2:

Has been in a job for 1 year and is a renter with no assets, but some savings.  They have a car loan that they have been late on a couple of times over the past few years.  Has a credit card that has a $5,000 limit but a balance of $3,000.  They got a  payday loan 3 years ago due to a problem with their pay/bank account.

Applicant 3:

Has been in their job for 6 months and lives in a share house.  They have multiple loans with a few lenders.  They have applied for a car loan 3 times in the past 6 months and been knocked back. They had a car loan 4 years ago that they defaulted payment on, but caught up the payments before the car was repossessed.  They are constantly late with payments on their existing credit commitments.

Which applicant would you be most comfortable lending your $100 to?

Most people would rank them in the order in which they have been put above. Some would not lend to Applicant 3 at all because there is a history and risk of not being paid back. 

Second consideration – what interest rate would you offer to each of the applicants if you were going to lend to them?  

  •  Would you expect a higher payback from the higher risk applicant?
  • Who would you be competing against for Applicant 1?  What if they offered a lower rate than you?
  • What would be the easiest way to see each applicants risk profile to determine the rate?

Credit Scores

Without every bank knowing each person's personal circumstance, we have what is known as credit scores in Australia.  This score is based on personal and financial information about you that is kept in your credit report.  (this is freely available to you).

How your score is calculated

As mentioned, what is in your credit report determines your credit score calculation.

  • How much money you have borrowed
  • The number of credit applications you have made
  • Whether you pay on time (or at all)

The score is a scale between zero and either 1,000 or 1,200.  The higher the score, the more ‘credit worthy’ you are seen to be.

The actual score then helps the lender work out how risky it is for them to lend you money if they decide to at all, and what interest rate would be offered based on the five-point scale (excellent, very good, good, average, and below-average)

A low credit score could actually affect your ability to get a loan at all.

Knowing your credit score can help you get a better deal with finance, especially if it is a high score!

Setting the rate

With the 3 applicants above, most likely Applicant 1 knows their credit score and the lender will provide the funds at a lower rate than Applicant 2 or 3.  This is not discrimination, this is about risk. The lender is within their rights to determine the risk and to offer a product/service accordingly. When I talked about the market regulating itself, this is what we are talking about.  A person with a good credit score isn’t going to just accept a higher rate, they are going to demand the market adjusts to them.

The higher risk applicant due to their conduct on loans, or the way they have handled money, is going to have less choice and most likely pay more.  The market will determine what the higher risk applicant can have, until the day that the high risk becomes a lower risk, this is how the money market works.

Lenders lend based on risk.  After all, it's their money.  Just like you wouldn't risk losing your $100 by lending to someone where there was a good chance they wouldn't pay you back, lenders base their decisions on risk profiles and act accordingly.

See also: Finance Pre-approvals

My credit score is low – how do I fix it?

 

STOP applying!

One of the most common mistakes we see potential borrowers make is multiple applications.  They will get knocked back with one lender and then go to more lenders.

Each time you make an application, it can drive down your credit score.  If your score is already low, it may come to a point that you are completely undesirable to any lender, no matter the interest rate.  Take a breath and understand that the lending criteria that has been applied to your circumstance is designed to ensure that you aren't over extending yourself. This could be from the serviceability of the loan through to the loan to value ratio of the item you are wanting.

It's tough to accept, but now may not be the right time!

Pay on time

If you want to improve your file, pay your bills on time!  If you can’t pay on time due to a particular circumstance, make sure you are ahead of the game and contacting the lender to make an arrangement. This includes phone bills and utility bills as these are the most common items that people default on – affecting the ability to borrow for things that matter like cars and houses.

Stick to your budget

Don’t over borrow!  Know your budget, stick to it.  Yes, it may be nice to have new shiny things, but if you determine a budget that allows you to save for those items – the future will be brighter for your when it comes to borrowing for assets like homes.

Stay away from pay-day lenders

There are SO MANY lenders in the market place that seem to be offering “Cash in a hurry” or “Access your pay before pay day”, with images of broken fridges or scenarios of the unexpected.

Pay day lending can destroy your credit score in a flash.  A main stream lender will see pay-day loans (especially multiple loans) and determine that you do not save for the unexpected, you don’t stick to a budget and you are a high risk.

What about Buy Now – Pay Later

The basic difference between a buy-now-pay-later lender like Afterpay, Zip-Pay etc is simply that you are paying fees instead of interest. It seems great. Get what you want now, pay later!  Laybuy without the agonising wait.

If you miss a payment, you are charged. If you default, you will end up with a negative mark on your credit history. It also won’t show on your credit file that you pay ontime, so it won’t positively affect your credit score.

Some BNPL services also do a credit check meaning you will have an enquiry on your file. (check with the service to see if they do)   As with the above point, stick to a budget, be disciplined with payments and work out what is more important for your future.

 

Final word

 

The finance market is a competitive place.  If you have a low credit score, you may think it is unfair.  Circumstances in your life have led you to having this score, but with any rating, you have the ability to fix it.  It takes discipline and determination.  There are many professional financial counselling services that can help you set a budget and even assist you in understanding how you can reach you financial goals.  It will be a journey, but it always starts with a step.

 

Disclaimer: The thoughts and opinions conveyed on this website are those of the author/s and are of a general nature. Any information provided does not constitute financial or general advice to you from Journey Finance Australia. When considering financial or insurance products, you should seek your own independent advice from a professional.

 

Get In Touch

1800 861 009

Locations

Melbourne

Brisbane

Sydney

Sunshine Coast

Townsville

 

Email

[email protected]

Hours

Mon:10am - 5pm
Tue: 9am - 5pm
Wed: 9am - 5pm
Thur: 9am - 5pm
Fri: 9am - 3pm
Sat: 8am - 1pm
Sun: Closed

 


Tradesperson with ute

Why choose a Chattel Mortgage

When you first started your business, it was most likely you, a pack of business cards, a phone and a dream.
No matter where you are at in your business building efforts, you should be proud of your achievements!

A lot of small businesses start out lean. Using a personal mobile phone and their own car to drive their business to the next level.

As time goes on – customers and revenue increase, websites get more professional, maybe even a wrap on the car, the personal phone becomes a business account and the personal bank account becomes a business account.

What about business vehicle/s or cars used to conduct business?  A lot of small to medium businesses still finance their cars through personal loans or dealership finance. This is more due to habit than anything and maybe not understanding there are products in the market that are designed for business. Is it the best option?

What is a Chattel Mortgage

It is a weird name, but essentially a Chattel Mortgage is finance for cars used for business purposes.  The word Chattel simply means "a personal possession" and 'mortgage' means that the lender of the money to purchase the chattel has a mortgage or title over the property until the loan is repaid.

The lender takes a ‘mortgage’ over the vehicle as security the same way a lender or bank takes security over the car if you financed it through a secured personal loan. It is still your car, but the security is placed over the car in the event of defaulting on repayments. Once the car is paid off, you take full ownership to sell the car or continue to use it for your business.

How is it different from a car loan?

It works the same way as a normal secured car loan but customisable to what you need now and in the future.

Main points

 

  • Use a chattel mortgage to improve your cash flow
  • If you are registered for GST you may be eligible to claim the input tax credit on your next BAS
  • General tax deductions and depreciation may be available for the business usage

A Chattel Mortgage...

  • Generally has lower rates compared to loans through the bank or dealership
  • Has GST, depreciation, and interest able to be claimed back easily
  • Has flexible terms, residuals, and options to include extras
  • Helps you manage your cash flow by allowing deposits or trade-ins
  • Gets you into business asset finance building a credit rating for your business for future needs to continue to grow your business.

Who can take on a Chattel Mortgage?

Many different entities can take out a Chattel Mortgage on a vehicle if the car is for majority business use.

  • Employees
  • A sole trader
  • Partnerships
  • Companies

 

What are the main benefits?

The main benefits of having a chattel mortgage include setting a residual or balloon to reduce the monthly payments, the option or potential to claim tax deductions for business use* and claiming input tax credits if you are registered for GST

What about tax and GST?

Most business people would be using their car for business purposes so you may be eligible to claim a tax deduction against your income for the interest charges along with the ATO set depreciation.  Your accountant will be the best person to speak to about what you can claim.

How does the mortgage work?

You own the vehicle, however, the financier will place a mortgage similar to a home over the vehicle as security. Set monthly repayments are made for the term and at the end, the financier will remove the mortgage.  If you have set a residual, you can refinance this reserved amount, sell the car and pay out the residual or use the car as a trade and payout the residual.

Who is it suitable for?

Any business that is registered for GST as you may be able to claim the GST from the vehicle's purchase price as an Input Tax Credit on the next BAS you complete.

 

** Always speak to your accountant regarding your eligibility for tax writeoffs or GST matters

Disclaimer: The thoughts and opinions conveyed on this website are those of the author/s and are of a general nature. Any information provided does not constitute financial or general advice to you from Journey Finance Australia.  When considering financial or insurance products, you should seek your own independent advice from a professional.

 

Get In Touch

 

1800 861 009

Locations

Melbourne

Brisbane

Sydney

Sunshine Coast

Townsville

Email

[email protected]

Hours

Mon:10am - 5pm
Tue: 9am - 5pm
Wed: 9am - 5pm
Thur: 9am - 5pm
Fri: 9am - 3pm
Sat: 8am - 1pm
Sun: Closed

 


Pre-approval

Car finance pre approval

 

What is a car finance pre-approval?

A pre-approval is a lender giving you ‘in principal’ agreement to lend you a certain amount of money for a car. It is finance that is put in place prior to purchase, rather than choosing the car, then seeking the finance

Shopping (research) vs buying

When buying a car, most people will research the car first, test drive. A high proportion of people decide on a car (or at least narrow to the brand and model), test drive, decide, then look at finance. Is it the right way to do it?

Car buyers when looking to upgrade their wheels spend around 59% of the total time of the process researching the car. (Autotrader). On average shoppers take around 108 days from start to finish, so 63 days is spent thinking about the car itself, prior to even setting foot in a dealership.

Usually, the next step is to head into the dealership and test drive. The moment you step into a dealership, you begin to match wits with car salespeople and their finance department.  Unless you are a cash buyer, the only barrier to the sale in the mind of the car salesperson is how you are paying for the car.  (it's usually one of the first questions they ask!)

They want you to buy even though you may still be researching. After all, that's their job.  There is a saying in the car industry.  "Getting the customer behind the wheel, sells the steel".  They hope that you fall in love with the car and gain emotional attachment.   They get you in front of the finance and insurance person to then help close the deal.  I mean, why not do it all in one place? It is convenient, and you feel great when you are approved, even though it may not be the best deal you can get.

Apart from not getting the best deal you could get if you spent more time researching the finance, when you engage dealership finance, the only restriction usually placed on the contract of sale is ‘subject to finance’.  This means if you are approved, you are going to have to buy that car or potentially face a cancellation fee. You have just moved from shopping to buying in one fell swoop.

The finance and insurance department

A lot of people go into a dealership with a loose budget in mind.  It could be a repayment budget or a car spend budget. What tends to happen is the dealership finance person focuses solely on the repayments and whether you can afford just that, rather than the total cost of ownership (everything it costs to run a car) They are skilled at it. It allows emotion to creep in and the budget head you may have brought into the process quickly goes out the window. It is not your fault, it is the way humans work.

Data shows that when buying a car, customers thinking about the finance only takes place in the last 14 days of the process. The finance (or the way you are going to pay for the car you love) is as important as the car you are choosing.

Why is the finance research so important?

Remember that finance involves interest.  That is, you borrow the amount you are paying for the car at a certain rate, then there is interest to be paid on top.  This can be thousands or 10’s of thousands of dollars depending on the finance deal you get.  Doing your research on finance is important to the overall cost of the car you want.

 How do you research finance?

 It can seem daunting but there are basically a few types pathways in the automotive marketplace*.

  • Dealer finance companies - these have direct relationship with car dealers, offering personal loans to customers to finance a vehicle purchase from the car dealership.
  • Lenders - these provide the funds for the car loan.  Banks, building societies, credit unions etc along with money market corporations and finance companies.
  • Finance brokers - these act as an intermediary by matching borrowers to lenders and their loan products, assisting and advising borrowers on the loan application process and negotiating interest rates on loans.

(*Royal Commission - Some features of car financing in Australia)

Hard and fast: If you go through a dealer, you will most likely end up through the dealer finance company.  Usually only one or two lenders so your choices are limited.

Do it yourself: If you go through the lenders directly, you will encounter having to do a lot of research yourself, comparing and speaking to lenders to find the right deal for yourself

Compare and save: A broker does this job for you.  Their primary role is to match the right lender, not just to your budget, but also to your financial circumstances. 

Paying cash gets a better deal?

 

Generally, this is true. If a dealer has a car in stock they want to move and you have cash, they are likely to wheel and deal with you.
If you finance through the dealership, or use advertised finance offers that promote low rates, you most likely will not get as good a deal.
Pre-approved finance is like cash. Walking into a dealership and being pre-approved means that you are in the drivers seat (pardon the pun).

Low interest or no interest car loans?

See those deals on TV or Facebook offering low rates? 1.99% or even 0%.
It seems too good to be true. Well, most times it is. Check the fine print!

Those deals are usually only available on specific models or variants and the dealer will not budge on the price no matter how hardnosed a negotiator you are. Looking a different model to the ones on offer? You will end up paying the standard or higher interest rate on offer in the dealership.

There also may be a honeymoon period on the rate that will expire mid-way through the loan and you will revert back to a high interest rate.

You may not be able to make additional repayments without penalty or there may be additional fees and charges or higher delivery costs.

At the end of the day, the dealership or manufacturer offering this deal is losing money on 0% as they make a lot of money from finance. Car companies will look to recoup the losses they make on the finance, one way or another.

In a lot of cases, customers found that they were worse off using these deals than they would have been if they had spent the time researching the finance.

 

Tips to getting the best deal

Do know your limits.. and stick to it

Pre-approvals can be up to a certain amount that you have determined suits your budget. For example, a $30,000 car may have a repayment of $400 per month, you have already added in costs like insurance, registration, CTP and maintenance and know what you can afford. If you have not done this, you may be led down a path that makes you solely focus on the repayment. When it comes time to servicing or replacing the tyres, you end up putting it on a credit card, exploding the cost of ownership of your car.

Do know your credit score

 

There is a direct link to your credit score and the interest rate you can get.  This is your bargaining tool. If you are asset backed (own a home or a mortgage) you can also achieve a good rate with certain lenders.

Credit scores are affected by your conduct on loans.

That is; if you have a job that pays regularly, pay on-time, have no defaults and don't make too many enquiries (shopping around with lenders) you probably have a good score.  It doesn't mean if your score is lower that you can't get a loan, it just means your rate may be a little higher.  Lenders look at risk factors and your score plays heavily into their calculations.  If you have a lower score, they are taking a risk, so their 'reward' or the money they make from your loan is higher.

We can help you get your credit score. Contact us for more information.

Don't confuse what you are doing

 

There is a difference between shopping and buying.  Shopping is the research component.  This is where you spend time 'shopping around'.  This could be for the car itself or the finance.  When shopping around for finance, it is really important that you aren't applying. A good broker will be able to give you a quote on a car without you having to apply.  The moment you apply, you have put an enquiry on your credit file.  If you do this numerous times, it can negatively affect your credit score for the future.

Don't reveal your intentions

Buying a car is similar to a game of poker. The first person to fold will be the person that loses in most cases.  Walking into a dealership announcing you are ready to buy or revealing exactly what your budget is to a dealer is allowing them to take control and to put you into something that you may not be able to afford or even a loan term or package that is unsuitable.

Don't gamble on dealership finance

As mentioned, dealerships make money through their financing departments.  Shopping around (making soft enquiries without applying) should form part of your research.  Brokers have a duty to ensure that your circumstances and needs are met in the product they are offering. Brokers also make money from the finance, but the laws governing brokers are designed to ensure they are acting in your best interest.

Do get pre-approved

Going into negotiations with a dealer with a pre-approval puts you in the drivers seat.  It is then up to the dealer to match or beat the finance deal you already have or to substantially discount the car to offset their potential higher finance cost.   If there is no alternative plan and you walk into a dealership to both look at the car and finance, they are completely in control.

Final thoughts

Having a pre-approval in place can mean the process is quicker. In a market with low stock or limited availability, you can snap up the car you want quickly and be on the road in your new wheels sooner rather than spending a few days getting your finance sorted. It also removes the pressure and allows you to make informed decisions about the finance.

Getting pre-approved

Getting pre-approved is simple.  You may know the car you want but haven’t ventured into the dealership as yet. We will work within your budget and you will know what limit you have to spend. Once you have found your car, it’s simply a matter of providing us the contract of sale and we resubmit for final approval.

Disclaimer: The thoughts and opinions conveyed on this website are those of the author/s and are of a general nature. Any information provided does not constitute financial or general advice to you from Journey Finance Australia. When considering financial or insurance products, you should seek your own independent advice from a professional.

Get In Touch

1800 861 009

Locations

Melbourne

Brisbane

Sydney

Sunshine Coast

Townsville

Email

[email protected]

Hours

Mon:10am - 5pm
Tue: 9am - 5pm
Wed: 9am - 5pm
Thur: 9am - 5pm
Fri: 9am - 3pm
Sat: 8am - 1pm
Sun: Closed

 


Test Driving a new car is important

Why Test driving a car before buying is important

Buying a car is an expensive decision.  You can research online, you can read reviews or talk to current owners, but there is no better way to understand if a car is right for you and your loved ones than to test drive.

Annoying car salesman riding shotgun

Test drive vehicles are known in the industry as demonstrators.  The car is usually registered, and the dealer does not get the car for free, they have purchased it, and eventually, before 5,000km has been put on the odometer they will have to sell it.

In most cases you won’t be able to test drive by yourself – the dealer will cite insurance clauses or they plain just don’t trust you not to throw the handbrake on or to flog the car they’ll eventually have to sell.

For a car you are unfamiliar with, a good salesperson will point out all the features and benefits, usually ALL the positives – this can be helpful but also distracting.  If you go into a test drive with these key points in mind, no matter what the salesperson does to continue his pitch from the passenger seat, you will have a good idea if the car is suitable.

Is the test drive car the same?

You may be looking at a particular variant, but the salesperson has put you in the model up, or even the top of the range.  There is obviously a tactic to this (showing you the best!) but also economics at play for the dealership. They cannot have every models variant as test-drive vehicles, so they usually will purchase a top-spec car for test drives.  If you are going to demo, you are going to show the best!  Of course, they hope that you will fall in love with the features of the top model and go for it.

Some things to ensure you find out is whether the car you are driving have the same

  • Engine
  • Transmission
  • Body style
  • Wheel size and type
  • Technology
  • Specifications

If your test drive car is not the same spec, make sure you find out the exact differences and see if you can live without them.

Try out the tech

In this modern age, cars have become computers/entertainment hubs/navigation/voice activated assistants on wheels.

Whilst these generally are great additions to a car and a ‘nice to have’, do you need them?

A lot of people now will want Android Auto or Apple Car Play as standard – it makes long hours of driving much better and integrates your phone into the car.  Like the prior tip, make sure the model you are looking at rather than the car you are testing has the tech you are looking for.

  • Is the audio crisp and loud enough? Does it have enough bass?
  • What driving technology is included? (Lane departure, cruise control, adaptive cruise, driving assistance, parking sensors, reverse camera etc) These technical marvels can make your ownership of the car that much better if you will use them.
  • Is the Bluetooth easy to connect and setup?
  • Is the satellite navigation intuitive and easy to use and understand?
  • Where are the USB ports for charging? (if any) Do they make sense, or will they be inconvenient?

Ask a lot of questions about the buttons and tech, if you are not going to use them in the future, what is the point of spending the money if you do not want or need it?

Power trip

We are not talking about a drag race machine here, but if you needed power to get out of trouble is it there?   Check how the car accelerates from a standstill and whilst cruising.  Many things can contribute to a car feeling underpowered including the type of transmission.   If you do not put it through it is paces in the test drive, then you really will have no one to blame if you find issues later.

Give me a brake

Most modern cars come with some amazing technology when it comes to brakes.  Testing the brakes is still important.  Do they feel powerful? Is there lock up?  Do you feel like the brakes are adequate? You probably will not be taking the car for a blast around a racetrack, but brakes are probably the most important system in any car.

Peace and quiet

Wind the windows up, turn the air conditioner and radio off and listen for noises.  Tyre, wind, and engine noises can be a deal breaker for some.  For others, not enough engine noise!  If you can get on a highway and do 100km/h legally, that would be an ideal test for wind noise and ‘drone’ from the exhaust system.  Whilst you are up at that speed, how does it feel? Solid on the road?  Try different road surfaces to see how well the suspension works over speed bumps or contoured roads.

Carry on

Some people forget about things they will have to carry.  Is there enough luggage or boot space?  Test it out. Put the seats down if necessary and visualise the things you normally cart around.  Shopping bags, golf clubs, surfboard, kids’ bikes, prams, camping gear, fishing rods. Think about the things you carry before getting carried away with signing on the dotted line.

Have a look at the cockpit storage.  This is a big deal. Handbags, wallets, phones, tablets, people carry a lot in a car. Is there adequate and logical storage?

Cram the pram

If you have kids, take your child seats, prams, and baby bags.  Do the child seats fit?  If you have one child seat, does it still allow for 2 adults in the back? Imagine fitting your shopping or other items you normally carry around along with the necessary items that you store.

If you have 3 child seats, will they all fit?

Where are the anchor points and if you must take seats in and out, how easy are the buckles to access? These little things checked now will mean a more positive ownership experience in the future.

Final approach

Parking, reverse parallel, 3-point turns.  All incredibly stressful at the best of times.  Do them all in a test drive.  See how the car handles, see how easy or hard it is to park.  Consider that you potentially have a salesperson sitting beside you and try not to choke, but if you do, it is ok.  The idea here is to see how manoeuvrable the car is.   Some cars will have a very wide u-turn footprint or be horrendously difficult to reverse parallel park.  It is good to know before time and to know you can live with it.

To tow or not to tow?

If you are going to be towing a boat, caravan, trailer, or anything on wheels behind your car, make sure you check the towing capacity.  There are two measurements.  Load on the tow ball (how much weight the suspension will handle) and towing capacity (how much weight the car can pull).

Backseat driver

It sounds weird, but a lot of car owners have never sat in all seats in the car except the driver’s seat.  Testing out all seating positions is important to make sure there is enough room for all intended or potential passengers.  Are the seats comfortable? Is there good visibility out the windows?  Are there air-conditioning vents in the back or does the AC system have a way of cooling the back of the car if they do not?

ICU

Sit in the driver’s seat and really feel it.  Adjust your mirrors and check visibility.  While you are there, see if the location of the hazard lights, indicator stalks and other switches and knobs are in a logical place that you can get used to.  A lot of cars in Australia now have the indicator on the opposite side to what most drivers are used to.  This is not a hard no situation, but you must ask yourself if you can live with it.

Warp speed

Does the car have any driving selection modes?  A lot of cars come with intelligent computer driven adjustments to save on fuel or to provide more power when needed.  Test all the modes out if the car does have them and ask any questions about them you need to.

Use sparingly

Most modern cars only come with a space saver spare tyre.  Although this is common, for some people who may do a lot of highway driving, this could be a deal breaker.  Space savers do offer the names intended purpose – to save space, but it also means in the event of requiring to use it, you will be restricted to 80km/h until you get the main tyre fixed.

Baby sitting

If you can, leave the kids at home.  Children as wonderful as they are and probably the main reason you are wanting to buy a car will become a distraction.  Telling Johnny to get his feet off the back seat or to stop poking the nice salesperson will inevitably cause you to miss something or not to get the experience you need to decide.

Stocktake

Before the salesperson leads you back into his or her office and starts their process of getting you to sign up, take some time.  Unless you need a car yesterday, emotional decisions can be costly ones.   Do not just test drive one car, find other cars in the same class and test drive those, preferably on the same day so you can do a like for like comparison.

Accentuate the negatives

Even if the car is perfect, it is a good idea to talk about what you do not like about the car with the salesperson.  The more positive emotions you show, the more likely you are to fall prey to a good salesperson.  It is not their fault nor are they bad people for doing this. Their job is to understand your needs, match you to something they have and ultimately sell you a car. If you only show positive 'buying signals' then you will likely drive out in that car.  Some easy things to say are comments such as "I'm not sure if I like the seats" or "I don't like the layout of the instrument panel".  If you actually spend the time looking for things you don't like, you won't notice them 3 months down the track and regret not taking the time to do this.

Insurance and maintenance costs

Always get a quote on insurance before signing anything.  Some cars in some location have astronomical premiums.   It is always good to be forewarned on costs including insurance and even servicing prior to ensure the total cost of ownership fits in your budget.

Put the pen away

Again, unless you are desperate to buy, do not sign anything on the day.  We always encourage buyers to have their finance in place first.  It will put you in the driver’s seat when it comes time to negotiate.

Final word

Hopefully, this has helped you create your own mental checklist of what to look for.

If you would like help in setting up a hassle-free test drive, please complete the form below and Journey Finance will help you.

Get In Touch

1800 861 009

Locations

Melbourne

Brisbane

Sydney

Sunshine Coast

Townsville

Email

[email protected]

Hours

Mon:10am - 5pm
Tue: 9am - 5pm
Wed: 9am - 5pm
Thur: 9am - 5pm
Fri: 9am - 3pm
Sat: 8am - 1pm
Sun: Closed


Buying a new car using a novated lease

Getting a great deal with a new car purchase

 

Most people when buying a car will do some research online and then head into a dealership to test drive a car.
It is at that point that the sales machine of a dealership takes over.
A dealership employs salespeople and those salespeople have targets and a sales system they are trained in to get you into the car.

Car Dealership tactics

Not all car salespeople are sharks, there are some excellent professional car salespeople in Australia -  but there are those who don't really care about you or what you want and are driven by commission.
From pressure tactics to plain badgering through constant follow up calls, going to a dealership can be a stressful experience.
How can you get a good deal when the dealership is in control?
Below we discuss the methods you can use.

Pay cash

In the old days, paying cash was king.  Dealerships loved cash because it meant that they were paid straight away, and they were able to move stock quickly.  Discounts flowed.

In modern times, dealership models have changed.  They have their own finance department and a big part of a dealership’s revenue comes from the finance.  Cash is no longer king, in fact, you may expect to receive LESS of a discount if you pay cash, no matter how good a negotiator you think you are.

The other issue with paying cash is you are purchasing a fast depreciating asset.  The average depreciation (lessening in value) of a car is 19% in the first year and 15% in the second and third year.

If you were to use the cash you have for something else, like an investment or paying down your mortgage to make money from your cash, that may be a smarter move.

The walk out

Other tactics customers employ include the walk out.  In the salespersons office the customer will be presented with a price and they will counter that with an offer. If the offer is not accepted, they walk out. The hope is the dealer will come running after them to concede defeat.

This can be a good method; however, you are reliant on the salesperson being desperate to achieve their targets and for their Sales Manager to approve any deal that you put forward.  Dealers are also very savvy and understand this tactic. They employ counter-tactics to deal with this.

Bottom line, a dealership has a price they will not drop below as it costs a lot of money to have a car in stock at a dealership.  The overheads in a dealership are huge!

The time of the month will also dictate whether this method works.  Towards the end of the month usually the pencil is sharpened a lot more than at the start, this is due to targets.

If your offer is realistic, you may get the deal, but in most cases, you will settle somewhere in the middle depending on the popularity and availability of the car.

Buy ‘old’ and in stock

Car dealers will generally be sharper on price for cars in stock over cars they have to swap with other dealers or order from the factory.

Dealers have a system that measures ‘ageing stock’.  The longer the car sits on the lot, the more it has cost the dealer and the more motivated the dealer is to sell that car.

If you are prepared to compromise on colour or variant and settle for what the dealer has in stock, you may find yourself with a very sharp deal.   This of course is dependent on the popularity of the car.  If a dealer knows they can sell it to another person for more because it is popular, then they will likely reject your offer.

Shop around

In the old days, dealerships were owned by families or individuals and you could shop around if you had multiple dealers in the city you reside in. Now, dealerships are mostly owned by large corporations or dealer groups. The dealer on one side of town is likely owned by the same company that owns the dealership on the other side of town. Shopping around is also time-consuming and somewhat exhausting.

You cannot generally just call up and get a deal, you must go in and spend time. Or you must look at buying outside of your local area which means the car will be trucked in and dropped off to a depot or your home. You miss out on the car handover – which is the feel-good part, with a nice smelling clean shiny car instead of receiving a truck soiled vehicle from a nameless truck driver.
There are other methods customers employ, however, these are the most common. Some work and some do not. When going up against car salespeople, you need as much help as you can get.

Use a car buying broker

There are car buying brokers who can do the negotiating on your behalf.  These services aren't free, but a quick Google could save you hundreds if not thousands off the purchase price of your new car.

Timing is everything

Dealers have targets, both from a business perspective and also the manufacturers they represent.  As the end of the month approaches dealers to become far more negotiable than at the start of the month, especially if they haven't hit their target.  Individual salespeople are more likely to bat harder for you if they aren't hitting their targets that month individually.

Some tips for this.  You need to be ready to go now.  Have your finance in place and be ready to sign on the dotted line.  Most of the deals you'll be offered in the last 10 days of the month will expire at the start of the next month.  You can usually tell if the dealership is busy on a Saturday and don't be afraid to ask "how's business?  Are you guys busy?".  Looking around the dealership will tell you if they are or not.  The quieter it is, hopefully, the more likely they will be to wheel and deal.

Pitch a price that's low, but not ridiculous

Doing your research prior will assist with this.  It should be understood that a base model vehicle will have less margin (profit) for the dealer, so asking for thousands of dollars off a car that sells for $19,990 probably won't fly.   If you start high, you have nowhere to go, but if you start low, you can always come up from that point.

This is my limit

You can also set a maximum limit of what you can spend.   Use the husband or wife as the backstop "My partner said I can't spend more than..." even if there is no partner! Just make sure if there is a partner, they aren't sitting there with you when you use this - and also are really hard to contact if the salesperson asks you to get them on the line.

Don't trade unless you absolutely have to

Having your finance in place first and if you can sell your current car elsewhere, do it.  What you see your 2003 Commodore being worth, the dealer sees probably 25% of that value.  They may give you a discount on the car you're buying, but they'll make this up by low-balling the trade.

Accessorise, but don't go overboard

Accessories personalise the car and make it yours.   You just have to ask yourself whether branded floor mats are important to you and if you are willing to pay full price for them.  Contrary to popular belief, new cars don't come with a full tank of fuel or carpet mats, these are all options.  Only get the accessories that you need!

Dealer delivery charges... what on earth?

It comes up on every quote you'll get from a dealer.  Most people say "But I'm picking the car up??!!". Dealer delivery is the money dealers charge to 'prepare' the car for you.  Detailing and covering their costs.  But $2,000+ is just ridiculous.  Try to negotiate this to under a grand.  If they don't budge, ask them what's included in the charge to justify it. Walk out if necessary!

If it's popular, good luck

If a particular car is popular, you are going to find it more difficult to get a great deal.  New models are usually hard to discount unless they aren't selling well, then you have to ask if it's the right car for you!   Usually after a few months the demand will die off and you will find yourself in a good position to negotiate.  If you line up for every new iPhone, then you may have to pay the full price.

The smart choice

Journey Finance takes all this hassle out of the process and negotiates the best deal we can get for you.  In 99% of cases, the deal is local which means you get the support of the dealer if things go wrong and ongoing personal service.

Get In Touch

1800 861 009

Locations

Melbourne

Brisbane

Sydney

Sunshine Coast

Townsville

Email

[email protected]

Hours

Mon:10am - 5pm
Tue: 9am - 5pm
Wed: 9am - 5pm
Thur: 9am - 5pm
Fri: 9am - 3pm
Sat: 8am - 1pm
Sun: Closed

 


GST Novated Leasing

Novated Leasing and GST

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Is GST payable on a car purchased under a novated lease?  No.  The customer (driver) does not pay GST.

How GST is calculated

When consumers buy goods or services from businesses, GST is collected by the business on behalf of the Australian Tax Office. (ATO) This is the law. 

GST currently is set at 10%.  A car valued at $30,000 – the GST component is $2,727.27. The ATO still requires this amount to be paid.

Who pays the GST on a Novated Lease car?

Because the dealership makes the sale, they collect the GST on the car.  How is this handled?

  • The financier of the lease pays the dealership the full amount once the loan has settled including GST.
  • The financier then claims back the GST from the Australian Tax Office via input tax credits.
  • The customer does not finance the GST at all!

What about ongoing costs?

The great part of a novated lease is that the ongoing costs of running the car including the lease payment, fuel, servicing, tyres, registration, insurance etc also get a GST saving.

The novated lease is a benefit offered by your employer and essentially you are using a personal car and running it like a company car for tax purposes.  That means, you do not pay GST on the running costs either as now your employer claims the input tax credit from the ATO. 

Contrary to popular belief, it is not 100% of the GST applicable to all your costs - as a novated lease is setup in a way that drivers avoid paying another tax. Fringe benefit Tax.

So, a portion of the running costs is paid in after tax dollars, but the pre-tax component is GST free.  It is still a significant saving, and another reason why Novated Leasing is a great way to buy a car.

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This example is for illustrative purposes only. You should seek financial advice to see if salary packaging or a Novated Lease suits your personal circumstances
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Handing over income tax

How Novated Leasing saves income tax

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Just about everyone who earns income pays tax.  

Your gross salary (salary before tax is calculated) determines how much you pay, and it is calculated each pay cycle.   Our tax system works progressively. That is, the more you earn, the higher the percentage of tax you pay from your earnings.  Our tax system also deducts tax each time you are paid. This is known as Pay As You Go (PAYG).  
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Gross Salary per fortnight

$1500.00

Taxable Income $1500.00
Superannuation $142.50
Minus: Income Tax $162.00
Minus: Medicare Levy $30.00
Take Home Pay $1308.00

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The more gross income you have or if you worked overtime, or got a bonus or commissions, the more tax you will pay in that pay cycle.

Can I reduce my taxable income?

The only legal way to reduce your gross salary is through something known as deductions.

If you have worked throughout the year and earned an income you would complete your tax return (end of financial year at June 30) This is essentially an audit to ensure you have either paid enough tax, or paid too much.

Depending on your deductions you may get a tax refund.  A tax return is the ATO giving you a refund of ‘overpayment’ of tax collected throughout the year.  That is; if you paid $10,000 in tax, but at tax time it is found that you only should have paid $9,500 in tax – you will get a refund of $500.

Novated lease equals tax deductions - every pay

With a salary packaged novated lease the annual total for your finance and running cost budgets (fuel, servicing, tyres, insurance, registration and CTP and roadside assistance) are turned into a fortnightly/monthly budget and a portion of this total is deducted from your gross salary each pay.  For example, the fortnightly cost for this car is $250 per fortnight.
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Gross Salary per fortnight

$1500.00

Superannuation $142.50
Salary Packaging Deduction $250.00

New Taxable Income

$1250.00

Minus: Income Tax $128.00
Minus: Medicare Levy $25.00
Take home pay $1122.00

Difference: 

$39.00 per pay

Difference 12 months:

$2028.00

Difference over 5 year term

$10140.00

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The benefit explained

In the first example $162 was paid in tax and $30 in Medicare.  In the second example, salary packaging was applied ($250 package for a car and it’s running costs).

This reduced the taxable income to $1250.00 saving $39.00 in tax on that pay.

A full $250.00 of value was still there to pay for all the costs of the car, but in fact in only cost $211.00

If you did not salary package – the car would still cost $250, but you would be paying these costs from your after-tax salary.

This effectively gives you an instant tax refund each pay – more than what the average taxpayer would be able to claim at the end of the year if they used their car for work.

With salary packaging - you do not need to keep logbooks and can use your car 100% for personal use.   Fully legal and approved by the ATO.
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This example is for illustrative purposes only. You should seek financial advice to see if salary packaging or a Novated Lease suits your personal circumstances
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Common questions when it comes to car finance

 

Everyone gets excited about buying a new car – but what are some common questions people like you ask?

What is the interest rate?

Of course, this rates highly (pardon the pun!)  The interest rate, the term of the loan and the size of the loan determine the repayments.  It is important to understand that different finance products attract different interest rates. For example a secured personal loan may have a better rate than an unsecured loan.

Why? In a secured loan, the car itself creates the security for the financier in case you don't make repayments and the risk is lower for the financier. They would repossess the car and sell it to recoup their costs. With an unsecured loan, no such security exists, so the risk is higher and the interest rate is higher.

Make sure you get a comparison rate that takes into account any fees or charges and be prepared to shop around or negotiate.

How long should the loan term be?

How long should the car loan term be?

This depends on your circumstances.  Some people keep their cars for a long time, others for just 12 months.   The type of finance coupled with your requirements and goals needs to be considered.

Often people who turn their car over regularly will opt for a lease. They don't own the car, the finance company does and the customer leases it for a period of time. This is not always the case as other people will still use traditional finance, sell the car at the end and use the proceeds as a deposit on their next car.

When deciding term, you should look at all the variables including total cost of ownership, interest paid, and what the car is worth at the end of the loan. (does it have good resale). You can do research on this on websites like Redbook.

Can I afford this? 

When in the emotional pressure cooker of buying a car, often people think in terms of the repayments alone whether they can afford their car.  You should take into account the total cost of ownership, including fuel, registration, insurance, tyre replacement, and service and maintenance.  Sounds boring, but knowledge is power.

Going to a dealership knowing exactly what you can afford will neutralise dealer tactics of having you focus on the repayment. Does this fit into your budget? It's much easier if you know exactly how much a car costs to run on average per year. The RACV has a handy guide.

Is 0% or low interest real?

0% finance rates - are they real?

There is much conjecture about 0% or really low-interest rate offers. These offers are mostly provided by the car manufacturer and seem really enticing. But, do they deliver what they promise?

Usually, no. The offers are available on specific models, not the whole range. For example, Car A may have an offer of 0%, but car B does not.

The other issue is how long the low-interest rate runs for. Usually, these rates are for 12-24 months and go back up to a normal interest rate. Surely, given a lower rate for the first 2 years you have saved money?

The answer is also in most cases no. If you could negotiate a better deal with the dealership it would work out better, but, these offers mean you can't negotiate. There are complicated relationships between financiers and dealers and bottom line, the dealer and the financier doesn't lose out. You will pay.

Got other questions about ca finance?

Journey Finance is a car finance broker. Our goal is to get you the right car and the right type of finance for that car. Our highly trained customer service team is here to help you every step of the way.