Five Costly Mistakes people make when getting a car loan

1. Accept a “Special” Finance deal from the dealer

Dealers often advertise “Special” finance deals, 1% comparison rate, interest free etc.

The problem with these is in the small print, not surprisingly. Often, you have no choice of loan term or residual and in virtually all instances, it limits the amount of negotiation on price you are able to do.

Ask us to work out the total cost of any offer from the dealer and we will do our best to save you money.

2. Look at an interest rate rather than the actual repayments and overall cost

You would think that nowadays you can expect full disclosure. That is not so with motor vehicle finance. Often, a base interest rate is quoted and then fees and charges added.

If you tell us what the repayments are, we can work out the effective interest rate you are being charged. It is always best to work out the total cost of the deal offered by multiplying the monthly repayment by the number of months and adding any residual or balloon payment. This gives you the total cost of your new car.

3. Take out gap insurance

The finance guy at your car dealership often pushes you towards gap insurance. Gap Insurance covers you if you write your car off and the payout figure on your car loan is less than the insurance payout. This gap can easily be thousands of dollars and so is the insurance premium.

If you take out insurance through us, we make sure that the amount of your insurance will always cover the amount owed on your car (as long as you always make your repayments on time). This can potentially save you thousands of dollars.

4. Get the wrong type of finance for their circumstances (Chattel Mortgage, Hire Purchase, Lease)

This is particularly important when you are self employed, running your own business. The common types of finance are:

Lease:

The car is owned by the finance company and you lease it from them.

Tax implications: The monthly payments contain GST and are tax deductible if used for business. You cannot depreciate the car since you don’t own it.

Commercial Hire Purchase:

More sophisticated name for Lease

Chattel Mortgage:

Fancy name for a car loan where the financier lends you the money to purchase a car and takes a charge over the car.

Tax implications: If you are registered for GST, you claim the GST paid on the car back in your next BAS. Only the interest component of the monthly payment is tax deductible. You claim depreciation in your next tax return.

5. Only get one lender to quote

Once you have accepted that it is probably not wise to go with the finance deal offered by the car dealer, you may be tempted to walk into the local branch of your favourite bank and apply for a loan there.

Or, you could come to us where we find the best deal available to you from a large range of financiers including:

Alphera Finance, ANZ Bank, Bank of Melbourne, Bank of Queensland, Capital Finance, Commonwealth Bank, FairGo Finance, Flexi Commercial, Liberty, Macquarie Leasing, Suncorp & Westpac.

Immagine how long you would take to compare loan offers from all of the above and be confident that you didn’t miss anything in the small print.