Aussie Loans

Car Finance Broker versus Dealer Finance

car finance broker dealer finance

You have been looking for a vehicle of your dreams or for your business and you have found the car you want. What about finance? There is a chance you could get carried away with your find and lock yourself into a financial agreement that does not suit your lifestyle options or does not adequately take into consideration your repayment ability.

Ideally you will look into financing before you look at making a vehicle choice. However, sometimes it may require you to search for appropriate vehicles first to establish a suitable budget. So, at times, the two can go hand in hand. There are many finance options and choosing wrongly or quickly can cause major headaches as time goes on.

Let’s have a look at the two most obvious types of vehicle finance: Car Finance Broker versus Dealer Finance.

Car Finance Broker

This financial service is an independent lender outside of any particular market such as motor vehicles, boats or real estate. Their focus is on the terms, agreement and the credit amount being offered. They have an obligation to assess a debtors circumstances before offering any amount for lending.

Here are the benefits of using a car finance broker

*They offer a range of car loans for both personal and business including:

-Secured

-Unsecured

-Novated Lease

-Finance Lease

-Commercial Hire Purchase

-Chattel Mortgage

*Links to multiple lenders and partners to obtain credit – chosen by the broker and customer together

*Offer multiple finance terms to suit customer circumstance

*Professional and registered financial lenders

 

Disadvantages of Car Finance Brokers

*Co-ordinate the offers from multiple lenders they may prioritise particular lenders

*They offer multiple loans and may not have extensive expertise with car loans compared with Car Dealer Finance

*They do not have direct access to vehicle purchasing

 

Dealer Finance

This financial service is directly related to the car dealer and offers a financial service in order to sell the vehicles on their lot. As such using dealer finance means you are subject to the vehicles available to them. They are aware of financial competition and do work with the customer to find appealing financial agreements to suit their needs.

Here are the benefits of using Car Dealer Finance

*They are well educated in the value of vehicles for purchase

*They specialise in car loans and finance and are aware of potential issues and advantages

*Interest rates available through other institutions are matched by car dealers

*Convenience of obtaining finance at the venue for purchase

 

Disadvantages of using Car Dealer Finance

* Harder to negotiate on the purchase price of the car – potential to pay hundreds of dollars or even a few thousand dollars more than using non dealer finance.

*Limited lines of credit available which means less flexibility in rates and repayment schedules

*Inflated loan establishment fees

*Monthly loan account fees

*Penalties for paying loan off early

 

Overall any financial choices should be done with research and preparedness. This is a serious commitment that you must be sure you can fulfil. Seek advice from both car dealers and financial brokers to determine the deal which best suits your needs.

Aussie Loans

Car Finance – What is a Novated Lease?

car finance novated leaseIf you are looking for Business Car Finance there are multiple options at your fingertips. Before you choose an option you should take some time to look at the options available to you and choose one that best suits your needs. A Novated Lease can be a beneficial way to secure financing that has advantages for both employees and employers.

What is it?

A Novated Lease is arrangement co-ordinated by a financier and made possible by the salary sacrificing options available. Firstly it is established that an employee needs a vehicle for business purposes and to circumvent big outlays by either the employee or employer a third party is involved: a creditor.

The employee secured a finance lease with the creditor whilst the employer agrees to take on the financial obligations outlined for the worker in the lease agreement. This means that the employer pays the monthly lease repayments on behalf of the employee using salary sacrificing which in turn gives them greater flexibility in their offer of a remuneration package to the worker.

If employment discontinues or the novation ends the financial obligations revert back to the employee and that is all that happens.

Who is it meant for?

This type of business finance will suit employees who are looking to include a vehicle as part of their package. If the employer offers salary sacrifice then it is an option for an employee.

Using a Novated Lease means that both the creditor and the debtor (employee) are able to claim an Input Tax Credit (ITC) for the GST attributed to the purchase of the vehicle and to the monthly lease payments themselves. This essentially makes the Novated Lease agreement GST-free. The exception occurs in two cases: at the end and early conclusion where GST is added to the residual value of the lease, usually both payable by the employee dur to ownership change.

Fringe Benefits Tax (FBT) a repayment benefit made normally to the employee based on the number of kilometres travelled. The more kilometres travelled the less FBT. This can also be offset through employee contributions to the maintenance of the vehicle and is worked out based on the Employee Contribution Method (ECM). The benefits will be being phased out by the Federal Government over the next three years and as such you should always seek professional financial advice as to the suitability of such lease agreements for your particular needs.

Benefits Explained

The benefits of a Novated Lease are different depending on whether you are the employee or the employer.

For Employees:

*You are able to influence the type of vehicle purchased to suit needs and purpose

*If employment changes you are able to take the car with you

*Car maintenance and care is under your control

*Repayments to the lease are done out of your pre-tax income, which could mean smaller running costs of the vehicle

*Equity is retained by you

For Employers:

*Ability to offer a more flexible and appealing remuneration package to an employee

*Residual risk is eliminated

*Superfluous vehicles are avoided if an employee leaves

*Administration for lease agreement is avoided due to Aussie Loans help and direction with the loan

*You save on Payroll Tax and WorkCover premiums