Saving on Car Loans in Australia

Finding a suitable type of a car loan is not always the easiest of tasks. There are new and used car loans that can be taken out on a secured or unsecured basis at variable or fixed interest rates. Banks, credit unions, peer-to-peer lenders and car dealerships all offer different types of car loans and choosing a single one is tricky. In order to make the right decision, a thorough car loan comparison is needed! So, compare car loans types, and car loan rates in order to make the right choice!

The most popular types of car loans include:

1. Standard Car Loan

The Standard loan is the most simple of car loans! It is the basic car loan that the majority of people are getting when buying a new or an old car.

This type of loan can be both secured and unsecured by assets (if you compare the car loan rates, the unsecured one has a higher interest rate). If you choose a secured car loan, the vehicle will act as a security for the loan. Thus, the lender or financer will demand for the vehicle be fully insured.

Some of the major advantages of the Standard loan include:

1. Finance can include on-road costs
2. You will know the agreed monthly repayments over an agreed period of time
3. Some very good car loan rates  are available at the moment

2. Commercial Hire Purchase

This car loan type is very different than the former. Here, the financer or lender buys the car and then hires it to the consumer over a set period.

Both individuals and businesses can use this type of a car loan! Monthly payments usually pay out the entire loan in the set period and then the vehicle is transferred to the borrower.

There are many pros for those who, once compare car loans, choose this type:

1. There are many options  available with regards to loan term and balloon payments and the structure of the finance.
2. There are fixed repayments and interest rates available
3. Generally, there is low capital outlay
4. There might be some GST benefits available such as no GST payable or tax deductions for business purchases and input tax credits available for those registered for GST 

3. Finance Lease

A financial lease is also known as “car lease”. If we compare this car loan with the previous one, we will find that they appear to be very similar! Here, too, the financer buys the vehicle and the leases it back to the motorist. The motorist can then use the car immediately with little or no capital outlay.

The leases are yet again, available for both individuals and businesses. The motorist is expected to pay a fixed, monthly rental payment. He is also expected to maintain the car in a good condition!

At the end of the lease period, the motorist can refinance, return, sell or buy the car for the residual amount.

The advantages of this type of car loan include:

1. The car can be used immediately
2. There may be tax deductions available if you use the car for business
3. Flexible loan terms are available
4. The car loan rate is generally lower, because finance is secured against the car, and the repayments are fixed 

4. Novated Lease

A three-way arrangement between the financer, the employee and the employer is needed for this next type!

The employee’s spire-tax wage is reduced in exchange for an equal value of vehicle benefits. The employee leases the car directly from the finance while the employer has to pay the financer through a novated deed on the employee’s wage.

All the cost to do with the car, such as registration, insurance and servicing, are covered by the motorist. He also has sole responsibility for the car in case of termination of employment.

With the Novated Lease, motorists can:

1. Choose the car that they like, rather than having the company choosing it for them
2. Take the car with them if they leave the company
3. Buy the car at the end of the lease
4. Be leased for 100 per cent private use
5. Make repayments out of pre-tax incomes

5. Operating Lease

With the Operating Lease, the financer buys the vehicle and then rents it to the motorist. It is important to note that the financer remains the owner of the car and the motorist has no risks associated with the ownership, including the residual at the end of the set period.

At the end of the sat period, the motorist has few options. He can buy the car, continue to rent it or he can change it to another, usually newer and better model.

Some of the other advantages of the Operating lease include:

1. Knowing the agreed monthly repayments over an agreed period of time
2. The rent can be tax-deductable
3. Shorter duration in comparison with some of the other popular car loans
4. No maintenance costs relating to the asset

6. Chattel Mortgage

The Chattel Mortgage is a fixed loan where the financer advances money to buy a vehicle. The financer holds a mortgage over the purchased car which is used as a security for the car loan.

Motorists can finance the total purchase price of the car. They can also make an up-front deposit or can use a trade-in. Usually, at the end of the set period, a residual payment is placed!

The vehicles bought with a Chattel Mortgage are used for business 50% of the time or more

With the Chattel Mortgage:

1. The motorists takes the ownership of the vehicle at the moment of purchase
2. The contract terms are flexible and can be tailored to suit different people’s needs
3. The interest rates are fixed, so the monthly repayments are fixed for the life of the loan

Before choosing this car loan, however, there is another important thing to know: Chattel mortgages are not regulated by the National Consumer Credit Protection Act (NCCP Act.) Hence, borrowers are more vulnerable due to a lack of consumer protections.

Whether you’re looking to buy a new or used car, it makes sense to shop around, compare car loans, and keep your options open. You never know what you might find!

Car Loan Calculators

Another great thing to do when looking for a suitable car loan is to look for a car loan calculator.

Car loan calculators (sometimes referred to as car repayment calculators) can be very helpful when trying to settle on a car loan. They basically do the car loan comparison for you! They compare different car loan offers and find the most suitable one for you by taking into account your monthly income and expenditure and the current interest rates.

A car loan repayment calculator is very easy to use by default. Most of the time, it is quite simplified, so that anyone can use it!

Other Tips to Get Savings on a Car Loan

Apart from utilising a car loan calculator, there are some other things that you can do in order to get a great deal on a new car loan.

1. Keep your loan as short as possible!

Always keep in mind that cars depreciate a lot over time. Your car loses value every single year, so you do not want to be paying for that car for more than 5 years.

2. Know exactly what you can afford!

Crunch the numbers before even applying for a car loan! Sit down and work put just how much you can afford each month. And add a buffer to that! It is always advisable to borrow only what you know you can afford to repay!

3. Consider after factory extras!

If you want to upgrade to a new car with some high-end extra features like tinted windows or a custom paint job, consider not buying the top model car just to get all of those extras included as standard!

Instead, look for these extra features as after-factory modifications. This comes off a lot cheaper which means that you can take out a smaller loan – with smaller repayments!

4. Know that early repayments could cost you!

Early exit penalties are quite common in the car loan market. Many lenders do not accept additional payments, so it is always a good idea to make sure you know the early exit penalty rate before you sign up for the car loan.

5. Read all the documents carefully!

This goes without saying but many people, unfortunately, get carried away with the excitement of getting a new vehicle and simply do not read the paperwork carefully. All those documents you are signing have to be read thoroughly! So, please do not get carried away and do not sign anything without making sure you understand it.

6. Do not be afraid to ask questions!

Loans, in general, are confusing, so do not be afraid to ask for help! The more you know, the better your decision will be! Ask for professional consultations and start from there!

Final Thoughts

Keep all of these pieces of advice in mind and before making the final decision, do not forget to make a good car loan comparison for saving money! Do your own research, compare everything there is to compare and make informed decisions only! Make sure you find the right car loan for you and get yourself on the road!