December 18, 2017

Understanding Different Types of Car Finance Options

There are a lot of financing options for you to consider when you plan on buying a car. In Australia, you can check out lenders like loans.com.au. Their websites have car loan calculators that can greatly help you work out your monthly repayment and customize the terms of payment. These are also great for when you compare car loans as well as the car loan rates as there are many different types of car finance options.

Here are several car finance options to consider:

Personal loans or car loans

This type of loan is a sum of money that a financial institution lends you to buy a car and payment is agreed upon usually on a monthly basis plus the interest which is calculated on an annual basis. The car title, generally, will serve as the collateral for the loan which means that failure to follow the payment terms will lead to repossession of the vehicle.

Personal loans can be secured or unsecured loans. Secured loans will require some of your assets as collateral for security purposes. With collateral, interest rates are lower, and lenders tend to be more flexible when lending more money. When you default your payments, the lender can use your collateral to cover for the amount of your loan. If the collateral is insufficient, you will be responsible for paying the difference. On the other hand, unsecured loans are not tied to any of your assets. This type of loan is typically more expensive, given that they have no collateral.

Finance Lease

This is where the financier or lender buys the car and leases it to the borrower. You can use the vehicle right away with minimal capital. You pay a fixed amount monthly and take full responsibility of the car. When the lease period ends, you can choose to refinance, return, or buy the car for the residual amount.

Novated Lease

This is an arrangement with the employee consumer, the employer, and the car financier. The employer’s role is to pay the financier the monthly obligations through the employees’ salary, meaning, the employees’ salary is reduced in exchange for the value of the vehicle. The operating costs of the vehicle is shouldered by the employee and, in case of employment termination, the employee takes full responsibility of the vehicle.

Chattel Mortgage

The financier lends money for the purchase of the car while holding a mortgage over the car, and this mortgage guarantees the payment of the loan. The ownership, however, is given to the borrower while still giving regular payments.

Do you have other ideas when it comes to car loan rate and how to compare car loans? Share your insights in the comments section.

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Balloon Payment Explained

Many opt to apply for a car loan to buy a car, and when you compare car loans to get the best deal, it is essential to weigh the pros and cons of several factors including the option to have a residual value or a balloon payment on the loan.  Should you select this option, how much should it be? Read on to know more about the balloon payment:

Also called a residual value, a balloon payment refers to the lump sum that is owed to the financial institute at the end of a car loan term, after making all the regular monthly repayments.  It enables you, as a borrower, to pay only a portion of the principal loan amount throughout the agreed term. Having a balloon payment lowers your monthly repayments in exchange for paying a lump sum when the loan term ends.

To illustrate: If you borrow $10,000 that will be paid for five years, and you agree to have a balloon payment of 10% ($1,000), you will make lower repayments on a monthly basis.  After five years, you will pay the lender $1,000.

Having a balloon payment for your car loan is optional, but should you wish to have this option, here are some tips to consider:

Compare car loans

The balloon payment will enable you to get the car that you want since it will reduce your monthly repayments. Take note, however, that in most cases, it can be a huge amount as it is based off a percentage of the purchase amount. Check the car loan rates so you can choose the right loan.

Know the interest involved

Taking out a balloon payment can mean a higher amount of interest payable throughout the loan term. This will also increase the amount of interest to be paid per repayment.  In other words, if you apply for a loan that comes with a balloon payment, a bigger portion of your outgoing cash flow can be tax deductible.

Make additional monthly repayments

Do you receive additional income such as bonuses? You can use these to add more repayments towards the residual value.

Upgrade your car

Having a balloon payment also enables you to keep your monthly repayments lower and update the amount of the balloon payment to the estimated value of the car when the loan term ends.  Some people trade their car in after making the balloon payment. Then they apply for a car loan for their next car with a balloon payment again.

Got other tips on balloon payment and how to compare car loans? Share your car loan comparison ideas in the comments section. 

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How to Get Pre-approved for a Car Loan

If you’re planning to buy a new car, you may have heard of the term pre-approved car loan. This setup offers a lot of benefits. First of all, you will have an idea of what you can afford. Since your financial capacity will be assessed beforehand, you will know how much you can borrow as well as your repayments and car loan rates. Also, it will give you the upper hand when choosing a car and negotiating a deal. By knowing how much you can afford, you can use this as leverage when it comes to discussing the sales price.

How to Get Pre-approved for a Car Loan

Shop around

When planning to make a major purchase through a loan, make sure to do your research. This holds true when buying a car. With so many brokers offering a wide range of services, it is best to compare car loans before signing anything. Check their car loan rates and other features so you can have the best deal.

Prepare all the necessary documents

Of course, you need to prove that you have the financial capacity to manage your repayments. Other documents are needed as proof of your identity.

Talk to your chosen broker

You can either call them or send your application online. They will assess if you’re eligible for a car loan and recommend the best options for you. They will then help you in setting up the pre-approval to the right lender.

Features of a Pre-approved Car Loan

Here are some of the features to consider when applying for a pre-approved car loan:

Fixed or variable interest rates

If you choose a fixed interest rate, your repayments will be the same every month throughout the duration of the loan. On the other hand, you can take advantage of the flexibility being offered by a car loan with variable interest rates.

Longer loan terms

Car loans with a fixed rate can have a maximum loan term of five years, but there are loan terms that can reach seven years, making repayments more manageable.

Several payment options

Lenders offer different payment options but in general, you can choose from weekly, fortnightly or monthly repayments, depending on what’s manageable for you. You can also use a car loan calculator to give you estimates of your repayments depending on the payment frequency.

Do you have other ideas on car loan comparison and car loan rates? Share your tips in the comments section.

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How to Get a Car Loan that’s Cheaper than Dealer Finance

Buying a car is a significant decision as it will affect your financial situation. Whether it’s for work or business or for family use, new or secondhand, the key is to determine your repayment options and if you can afford it.

You can get a car loan or dealer finance. In some cases, a car loan is a better choice. Unlike dealer finance, a car loan offers more options and flexibility. If you cannot keep up with repayments, the bank can adjust your loan term. Also, there are banks that allow early repayments without fees. How can you get a car loan that’s cheaper than dealer finance? Here are some things to consider:

Compare car loans

Know what’s available and check what meets your requirements and financial situation. There are several financial institutions and unions that offer a range of car loans. Make sure to know their offerings so you can have a well-informed decision.

Check the interest rates

The interest rate plays a significant role in either car loan or dealer finance as it affects the amount of your repayments. In general, dealer finance offers lower car loan rates but this doesn’t necessarily mean better deals. Interest rate is an important component but there are other factors to take into account. That is why it is important to check the rates of both options to get the best deal for you.

Know how much you need to pay regularly

You can determine the amount of repayments using a car loan repayment calculator. Bear in mind, however, that it will only give you estimates. There are many factors involved when buying a car, so use a car loan repayment calculator only as a guide.

Be wary of extras

The actual amount should not be affected by extras such as extended warranty. The same goes for other charges that may come with the car loan. Make sure to ask about the extras so there are no unpleasant surprises later on.

Car loan and dealer finance are two common options when buying a car. Each has its own benefits and disadvantages. What’s important is to weigh these pros and cons to see which offers a better deal based on your requirements and preferences. Should you choose a car loan, keep these tips in mind so you can buy your car with terms that are in your favor.

Got other ideas on car loan rates and how to compare car loans? Share your tips in the comments section.

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How to Tell if a Car is Fuel-efficient before You Buy

Many Australians opt to buy a new vehicle, whether for business or work or family needs. There are so many models to choose from and a lot of things to take into account. This makes the car selection process a bit time-consuming, not to mention the car loan rates which are also important when buying a new car.

One of the main considerations when buying a new car is its fuel efficiency. It refers to the distance that you can travel on a certain amount of fuel. This feature of a new car means that the further you can drive every 100 kilometres, for instance, the more money you will save on petrol. Not only is it relevant in reducing the impact to the environment through lower greenhouse gas emissions and air pollution, it signals significant savings in the long run. But how can you tell if a car is fuel-efficient before you buy?

Fuel Consumption Label

Cars, four-wheel drives, as well as light commercial vehicles available in Australia should display a Fuel Consumption Label which indicates the running costs and emissions performance of the vehicle. You will see figures that show the number of litres of fuel needed to drive 100 kilometres, as well as emissions of carbon dioxide (in grams) per kilometer. Bear in mind that the lower the figures are, the better.

However, for cars which were manufactured from 2004 onwards, you can check their fuel efficiency information at the GreenVehicleGuide. If you’re looking at cars which were made between 1986 and 2003, you can check the fuel consumption guide database.

Petrol vs. Diesel

While petrol is the preferred fuel choice in Australia, diesel is getting more and more popular. In general, engines running on diesel are more fuel-efficient since they use compression ignition that leads to a more efficient fuel-burn.

Compare car models

It pays to do a lot of research to know which vehicles are fuel-efficient and suitable for your needs and preferences. You can check the websites of car manufacturers as well as comparison sites so you can compare their offerings and come up with a more informed decision.

While checking car models, you may also want to compare car loans. Both are essential components when it comes to buying a new car. You can check car loan rates and even use a car loan calculator so you will have an idea on how much money you will need for repayments.

Got other ideas on fuel efficiency, car loan rates, and how to compare loans? Share your tips in the comments section.

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Top 10 Cheapest Cars in Australia at the Moment

For many, having a car is a necessity. Whether for work or family use, a car makes travelling more convenient. In cases such as travelling with an infant or young kids, or moving a lot of stuff to another area, public transportation may not be ideal and a car becomes a better option.

Nowadays, you will see a wide range of cars from almost 50 different car manufacturers. Obviously, there are so many types to choose from and finding the right one for you can be a challenge. To make the selection process easier, we’ve rounded up 10 of the cheapest cars in Australia at the moment.

Suzuki Alto ($11,790)

It may be small, but Suzuki Alto comes with a lot of features. With its 1.0-litre three-cylinder engine, you can expect 50kW of power and 90Nm of torque. It’s also one of the most fuel-efficient cars out in the market today, as it uses about 4.7L/100KM. It also includes Bluetooth, six airbags, central locking, and a multi-format six-speaker stereo. The downside? It can only accommodate four people.

Mitsubishi Mirage ($12,990)

Five-star ANCAP safety rating, three-cylinder engine that churns out 57kW of power and 100Nm of torque, fuel consumption of 4.6L/100KM, plus the standard inclusions of Bluetooth, eight airbags, a multi-format and user-friendly audio system – you really can’t go wrong with Mitsubishi Mirage. This compact vehicle is one of the most fuel-efficient new cars in the country, and it’s very affordable too! But wait – did we mention that it can seat five people?

Nissan Micra ($13,490)

If you’re looking for a new car that’s both affordable and fuel-efficient, you may want to consider Nissan Micra. Aside from the Bluetooth and eight airbags, it comes with keyless entry, electronic brake force distribution, and stability and traction control.

Holden Barina ($14,990)

This compact car continues to be one of the favorites of many Australians, and for good reasons. Holden Barina can seat five people and comes with the standard features. It has a five-star ANCAP safety rating and offers 85kW of power and 155Nm of torque with its 1.6-litre engine. The downside? Its fuel consumption is at 6.8L/100KM.

Holden Barina Spark ($12,490)

Catering to the younger market, Holden Barina Spark offers 59kW of power and 107Nm of torque, thanks to its 1.2-litre, four-cylinder engine. It may not have Bluetooth, but it comes with eight airbags for protection in case of a crash and central locking. It can accommodate five people.

Cherry J3 ($14,990)

It may be a newcomer in the cheap transportation category, but Chery J3 meets the requirements on power and affordability. With its 1.6-litre, four-cylinder engine, it can generate 93kW of power and 160Nm of torque. It’s also the largest car among the vehicles in this list.

Honda Jazz ($14,990)

This car is beautiful inside and out. From its 1.5-litre iVTEC four-cylinder engine generating 88kW of power and 145Nm of torque, fuel consumption of 6.2L/100KM, to flexible features like a touchscreen interface with a rear-view camera, and fold-down rear seats, it’s no wonder that Honda Jazz got a five-star ANCAP safety rating.

Kia Rio ($15,290)

This car comes with a higher price, but it excels in terms of fuel consumption which is at 5.7L/100KM. It also offers 79kW of power and 135Nm of torque. It also has a five-star ANCAP safety rating. However, it lacks features such as reverse camera, cruise control, and touchscreen interface. Also, its stereo only has four speakers, while you’ll find six in other cars.

Volkswagen Up! ($13,990)

Another popular addition to the micro-car segment is Volkswagen Up! It may be small but it certainly packs a punch. It has a five-star ANCAP safety rating, electronic diff lock with stability and traction control, and Crash Avoidance technology. While it can accommodate four people, it is known to offer one of the most enjoyable rides in its category.

Toyota Yaris ($14,990)

This five-seater car offers 63kW of power and 121Nm of torque, thanks to its 1.3-litre four-cylinder engine. It also has the standard features such as Bluetooth, voice recognition, trip computer, and nine airbags which help it earn a five-star ANCAP safety rating.

Got other things worth-considering when it comes to cheap transportation and cars in Australia? Share your ideas in the comment section.

Links: https://www.carloans.com.au/top-10/top-10-cheapest-new-cars-on-sale-in-australia-today/

https://www.finder.com.au/cheapest-cars

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Green Vehicle Guide in Australia

In recent years, we’ve been hearing news of establishing policies that will help reduce the impact of climate change. Support from numerous governments is needed to achieve this goal but as citizens, we can also contribute to this initiative. In fact, we can do this in a lot of ways, and one of them is to choose an environment-friendly vehicle.

What makes a vehicle environment-friendly? In general, a car or vehicle can be considered environment-friendly if it has a low impact on the environment. How would you know if your vehicle is environment-friendly? This is where the Green Vehicle Guide in Australia comes in. In a nutshell, it provides details on how light vehicles sold in the country perform in terms of reducing its impact to the environment. These details include the greenhouse rating based on carbon dioxide emissions, air pollution rating based on emission standards, and fuel consumption.

Are these details from the Green Vehicle Guide reliable? Yes, the information is given out by authorised representatives of vehicle manufacturers. It comes from the certified data that is necessary for labelling standards on emissions and fuel consumption. Data is then cross-checked and audited by the department.

Planning to buy an environment-friendly vehicle? Here are some things to consider:

  • Check the Green Vehicle Guide. With essential information on carbon dioxide and fuel consumption, it will greatly help you identify the model of the vehicle that has the lowest possible impact to the environment.
  • Compare car loans. Banks and other financial institutions vary in terms of the car loans that they’re offering. To get the best deal, make sure to check their car loan rates. You can likewise use a car loan comparison online and/or seek professional advice.
  • Use a car loan calculator. Car loan comparison will be easier if you use a car loan calculator. This gives you an idea of the amount of monthly payments that you need to pay. Take note, however, that a car loan calculator can only give an estimate. You may use it as reference so you can adjust your regular budget.

If you’re serious about buying a green vehicle, consider checking the details provided by the Green Vehicle Guide. By buying an environment-friendly car, you will be able to do your share in reducing the impact of climate change.

Do you know other things about the green vehicle guide and car loan comparison that are worth considering? Share your insights in the comment section.

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Car Loan versus Car Lease

When it comes to cars, some people find it difficult to decide what the better route is: should you buy or lease a car in Australia? This significant expense requires careful consideration of a lot of factors, particularly your needs and financial situation. To help you decide which will work well for you, let’s look at the advantages and disadvantages of car loan and car lease:

Car Loans

One of the common ways to finance a car is getting a car loan. After about three or five years’ worth of monthly repayments, you will be the owner of the car. Banks and other financial institutions offer a wide range of car loans. To get the best deal, many use a car loan repayment calculator to ensure that you’re getting competitive car loan rates.

The main benefit of getting a car loan is that once the loan term ends, you will be the owner of the vehicle. Even if you’re still paying for it, you can already make any changes to the vehicle. Also, you can have flexible payment terms in the sense that you may be allowed to reduce your monthly repayments by paying a balloon payment at the end of the loan term. On the other hand, getting a car loan means higher payments than when you opt for a car lease.

Car Lease

This means borrowing a car and you’re only paying for the use of the car for a certain period. A car lease generally comes in two types: finance lease and operating lease. The former involves paying monthly payments until the end of the term. After that, you can either go for residual payment depending on the value of the car, or move the lease to a new car and pay the lease monthly. On the other hand, the operating lease involves making monthly payments until the end of the lease term. After that, you will hand over the car.

Unlike a car loan wherein you need an initial cash outlay or deposit, a car lease does not come with a downpayment. Also, you can expect lower payments since you are only borrowing the car. But this leads to a disadvantage. At the end of the lease term, you need to return the car. You do not own it so you cannot make any modifications while leasing it.

Whether it’s a car loan or lease, the key is to take time to understand the factors involved. Compare car loans and features of car lease from several companies, and decide based on your needs and financial capacity.

Got other tips on car lease and how to compare car loans in Australia? You can share your ideas in the comments section.

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What is a Chattel Mortgage when Talking about Car Loans

If you’re a business owner in Australia and you are looking around for a great car loan deal, you may have come across the term chattel mortgage. What is it? What makes it different from a typical consumer loan?

A chattel mortgage is a commercial car finance product wherein a finance company lets you borrow money to buy a car or vehicle (chattel) that will be used mainly for business, and you’ll make regular payments on the loan (mortgage). It differs from a consumer loan in the sense that the finance company secures the loan with the vehicle that you want to buy. Once you’ve fully paid the loan, you can take ownership and have a clear title of the vehicle and the mortgage will be removed.

A chattel mortgage comes with several benefits. It offers flexible contract terms, lower interest rates compared to consumer loans, fixed monthly repayments, and tax deduction. A residual balloon payment can also be applied so you can have lower monthly repayments.

There are different finance companies that offer chattel mortgage and car loans. Consider these tips to get the best deal:

  • Do your research and compare car loans. With so many things to consider, it is best to look around and see what your options are. Check the car loan rates and other features so you will have an idea of what meets your requirements and financial situation.
  • Use a chattel mortgage or car loan calculator. This gives you an estimate of the amount of your monthly repayments together with the interest. This is a helpful tool for car loan comparison as it gives you an estimate of how much you need to pay based on your preferred term.
  • Seek financial advice. A financial professional can help you better understand the terms related to car loans. It also has taxation implications. Cash basis taxpayers may claim all GST input tax credit up to the depreciation limit related to the purchase of a vehicle under a chattel mortgage facility. On the other hand, monthly repayments or residual amount is not subject to GST.

Do you have other tips on chattel mortgage and car loan comparison in Australia? Share your insights in the comments section below.

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Why Your Existing Bank Might Not Be The Best Option For a Car Loan

Whether you’re buying a new or used car in Australia, one way to fund it is to get a car loan. It simply means borrowing money from a lender, then you will repay it with interest for a certain period, commonly known as “term”. It varies depending on the lender. Terms range anywhere from 1 to 10 years.

If you need a car loan, your existing bank may be the first thing that comes to mind. There’s nothing wrong with it, though you may want to compare car loans offered by other lenders who can give you a better deal today.

Here are factors to look into when applying for a car loan:

Compare car loans

Aside from your existing bank, consider other lenders for car loan comparison. By knowing their offerings, you can better decide which option suits your needs and financial situation. You can likewise use a car loan calculator online to work out your potential monthly repayments based on different interest rates and terms.

Look for competitive car loan interest rates

The interest rate plays a big role when determining the term and how much your repayments will be. In general, the lower the interest rate, the lower your repayments will be. However, the cheapest rate doesn’t make the car loan the best one for you. While you’ll be paying reduced repayments, you’ll most likely do it for a longer term and you’ll end up paying way more than you should.

Check if you can reduce your repayments

There are ways to have lower monthly repayments to make it easy for your budget. If possible, borrow less money. This greatly reduces your monthly repayments. You can also ask if the loan has a residual balloon payment. This means that there is an agreed amount to be paid at the end of the term, while the remaining amount will be paid throughout the term.

Understand how repayments work

Know when you need to pay and how. Also, ask if there are any penalties involved if you make extra payments or be able to pay the loan before the term ends.

Final Thought

Your existing bank is only one of several options on how to get a car loan. Look at offerings of different lenders so you can narrow down your selection and get the best car loan for you.

Got other tips on car loan comparison and loan rates in Australia? You can share your ideas in the comments section below.

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