Aug 31

Looking for a new car loan in Australia – then use a broker

Published in new car loannew car finance by Vicky Edema
Quite often when you are looking to buy a new car, the dealership will put considerable pressure on you to sign up for the finance with them. This was my experience recently when I purchased a new car. It would certainly have been more convenient to simply sign up at the dealership but I decided to check out other options and phoned my mortgage broker (he had helped me find a cheap home loan and I knew he also had access to cheap rates for people after a new car loan).

What I discovered is that you need to be careful when considering a new car loan. Most new car finance includes a residual figure – this is the amount that remains owed on the car at the end of the lease period. For example you might obtain a new car loan for the purchase of a $50,000 Holden or Ford. The lease or hire purchase agreement will be for say $30,000 over a 3 or 5 year term with a residual of $20,000 – this is the amount that is payable by you at the end of the new car loan term. Quite often financiers will quote a weekly or monthly repayment figure which because it seems manageable also seems attractive. But more often than not the interest rate is much higher than you would think. Make sure when you take out a new car loan that you know the real interest rate that you are paying.

While you may want to keep your monthly repayments to a minimum you should try and ensure that by the end of the new car loan term the residual amount you owe will be covered by the value of the car. There is nothing worse than taking obtaining new car finance for 5 years, making the minimum payment, then finding at the end of that new car loan you owe much more than the car is worth. It is painful to have to find $5000 in a lump sum to pay out the lease whereas if you has tightened your belt a little more during the new car loan term then instead of having to pay a shortfall you might find some extra dollars in your pocket.

By talking to my mortgage broker I was able to access a terrific car lease and I was also advised about different new car loan structures that can be quite tax effective. My mortgage broker was able to put me onto a package that involved salary sacrifice as well as including roadside assistance and fuel so that after tax I was much better off. I had been unaware of such structures but by relying on my mortgage broker I actually ended up saving myself a lot of money.

Don’t rush into the car dealership arrangement without first considering other new car finance available in the market. A good lease broker (or in my case my mortgage broker) will invariably be able to source a cheaper new car loan for you and may have recommendations on how to package it more tax effectively. My mortgage broker was also able to negotiate a better price on the actual car purchase as well, because of volume discount arrangement he had in place with a number of car dealers throughout Australia.
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