How to find the best car loan rates in Australia
We break down the different types of auto financing to help you choose the best option for you.
If your ears haven't been taped, you've probably heard a lot of interest rate chatter lately.
But just in case you somehow missed it, let us cut the story down for you; interest rates are low and likely to get lower (thanks to our lagging economy). And while they are almost always mentioned in connection with mortgages, they also have loans. What means? When official rates are high, so are car loan rates. But when are they low? Well, maybe it's time to go shopping.
So to help with this particular mission, we break down the different types of car loans available to help you decide which one is the best option for you.
This sounds more complicated than it really is - like taking out a loan for one of Henry VIII's wives, but it really just means that you're mortgaging the car, taking possession (or ownership) only after all necessary payments will be made. were made.
Think of it like a mortgage on a house, where the house is only really yours after you've paid the bank in full for it.
The key difference between a mortgage on personal property and a regular secured loan (in which the vehicle is collateral and the lender can sell it if you can't make payments) is that this particular financing arrangement most often applies to business purchases. , opening up all types of tax deductions and GST requirements if the vehicle is used primarily for business purposes.
But, as with any loan, you choose the duration of the agreement, and your payments (whether monthly or weekly) are calculated accordingly.
This sounds more complicated than it really is - like taking out a loan for one of Henry VIII's wives, but it really just means that you're mortgaging the car, taking possession (or ownership) only after all necessary payments will be made. were made.
Think of it like a mortgage on a house, where the house is only really yours after you've paid the bank in full for it.
The key difference between a mortgage on personal property and a regular secured loan (in which the vehicle is collateral and the lender can sell it if you can't make payments) is that this particular financing arrangement most often applies to business purchases. , opening up all types of tax deductions and GST requirements if the vehicle is used primarily for business purposes.
But, as with any loan, you choose the duration of the agreement, and your payments (whether monthly or weekly) are calculated accordingly.
Renewed leasing introduces a third party to the car purchase agreement, with your employer joining you and the lender. It's a little hard to get over at first because you're basically being asked to pay for something you won't actually own. Hence the “lease” part of the car leasing deal.
Essentially, an upgraded lease means your employer is a party to your purchase agreement and allows you to pay for your car as part of your payroll package (which also conveniently saves them some money) by paying your car payments for you out of your pre-tax income. . Your income tax is then calculated based on your reduced salary.
Another tax bonus is that you don't have to pay GST on the purchase price of a car when you don't buy it, reducing the cost by another 10 percent.
Most auto loans you come across will be "secured" loans, which basically means the vehicle itself acts as your collateral.
Just as a bank lends you money for your home, a lender adds value to a car knowing that if you don't pay, they can at least recoup some of the money by selling the car. This is a car loan.
You will find that interest rates on secured loans are generally lower than unsecured rates, mainly because the lender rightly sees them as less risky than just handing over a wad of cash without paying back if things go wrong.
Secured car loans are probably the most common form of car loan because they are very easy for both parties to understand and are often used to buy new and used cars.
Most auto loans you come across will be "secured" loans, which basically means the vehicle itself acts as your collateral.
Just as a bank lends you money for your home, a lender adds value to a car knowing that if you don't pay, they can at least recoup some of the money by selling the car. This is a car loan.
You will find that interest rates on secured loans are generally lower than unsecured rates, mainly because the lender rightly sees them as less risky than just handing over a wad of cash without paying back if things go wrong.
Secured car loans are probably the most common form of car loan because they are very easy for both parties to understand and are often used to buy new and used cars.
Have you ever seen an ad that says "comparison ratio 0.1%"? Perhaps on a flag near the dealership?
This is because car companies or their dealer networks can arrange the financing of a car purchase on their own, and there are times when the rates they offer (usually during sales periods or when there is excess stock to transport) are better than anything you could find. in other stores. traditional lender.
Alternatively, the dealership may just be happy to do the hard work for you, essentially applying for a loan from a lender on your behalf. And what's more, they will be interested in closing the deal, which means that even if you have a bad credit history, you can leave by car on the same day thanks to an auto loan on the same day.
But remember, if something sounds too good to be true, it often is. Demand to know the total repayment of your loan, and what will be the total cost of the purchase, including all fees. And then compare that price to the price you can get from a third-party finance company—your bank or some other lender—and how cheaply you can get the same car if you raise your own money.
Do you know that there is a huge mortgage brokerage industry? Well, there are brokers for every other type of finance, including car loans.
The idea is that you contact a car loan broker to find out how much money you would like to borrow and whether the loan is secured or unsecured, and then let them compare car loans in Australia.
A good broker will then evaluate your eligibility with a range of lenders and come back to you with the best interest rate they can find, giving you a list of the best car loan rates in Australia. Well, that's how it works, at least in theory.
The broker then receives a commission from the lender of your choice (and sometimes a fixed commission for the life of the loan, known as a "trace"), and you save a lot of legwork and can even get a low interest rate. a loan you may not have known about.
Do you know that there is a huge mortgage brokerage industry? Well, there are brokers for every other type of finance, including car loans.
The idea is that you contact a car loan broker to find out how much money you would like to borrow and whether the loan is secured or unsecured, and then let them compare car loans in Australia.
A good broker will then evaluate your eligibility with a range of lenders and come back to you with the best interest rate they can find, giving you a list of the best car loan rates in Australia. Well, that's how it works, at least in theory.
The broker then receives a commission from the lender of your choice (and sometimes a fixed commission for the life of the loan, known as a "trace"), and you save a lot of legwork and can even get a low interest rate. a loan you may not have known about.
Interest rates for large lenders (such as the big four banks) are generally higher than for small lenders. And this is certainly true for car loans.
What will my payments be? Cheap car loans Australia
To see how much of a difference a lower rate can make, we calculated loan payments of $30,000 over five years for car loans in Australia.
At 8.49% (bank rate), your monthly payment is $632.48, which means the debt will be repaid in five years. But at 5.34 percent, that number drops to $459.20, with the loan repaid over the same time period.
To see how much of a difference a lower rate can make, we calculated loan payments of $30,000 over five years for car loans in Australia.
At 8.49% (bank rate), your monthly payment is $632.48, which means the debt will be repaid in five years. But at 5.34 percent, that number drops to $459.20, with the loan repaid over the same time period.
There's no big secret to getting approved for a loan - lenders want to lend (after all, that's how they make their money) and most will try to find a way to make that possible.
Of course, having a high credit score, regular income, and a proven ability to repay debt will work in your favor.
What is less known, however, is that rates, like most things, are actually negotiable. Don't be afraid to shop around and ask for a better price than advertised - you might be amazed at what's possible.
