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.

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Car Finance – Advantages of Business Car Finance

business car financeA vehicle is an important part of a functional business. There are many ways you can contribute the use of a vehicle to business expenses, but if this is combined with personal use the tax credit system and application can become quite time consuming. Having a vehicle used solely for business is the best way to record the use of it for tax purposes. Sole traders, companies and partnerships have five main options available to them. Here are some of the main types of business car finance explained.

1.       Novated Lease

An agreement made between an employer, employee and finance company. This results in the employee undertaking a Car Lease or Finance Lease with a creditor, but where the employer takes the financial obligation such as monthly repayments and under the salary sacrificing arrangement extends the use of the vehicle to the employee.

The benefits of this are control, choice and portability for the employee as they are in charge of maintenance, choosing a car to suit their needs and the ability to take the vehicle with them should their job change. For employers there is no residual risk, limited administration needed to organise the arrangement and a reduction in pay-roll tax and WorkCover premiums.

2.       Fully Maintained Novated Lease

This type of business car finance is the same as a Novated lease except that in addition to the salary sacrificing the expenses associated with the vehicle are used as deductions against the employee’s pre-tax income. The system for maintenance and fuel costs are organised with the financier.

The benefits of this type of arrangement for employees is that they save money by minimising tax and GST associated with the car itself and the maintenance costs. For the employer they can offer a more tailored remuneration package that costs the business very little in terms time, effort and risk of excess of vehicles if an employee leaves.

3.       Chattel Mortgage

This allows a customer to purchase a vehicle through advanced funds by the creditor who has taken out a “mortgage” on the vehicle to secure the loan done by registering a Fixed and Floating Charge with ASIC. Once full repayment is received the ASIC charge is removed enabling transfer of the title.

Benefits include knowing the cost in advance, tax breaks when used for business, fixed interest rates and GST advantages for input credit.

4.       Finance Lease

A financier purchases a car based on the customer’s needs and leases the vehicle to them offering a fixed monthly lease rental for an agreed length. When the lease term has ended the customer can choose to pay a final instalment and obtain ownership, trade the vehicle for value or re-finance the residual and continue leasing.

The benefit of this arrangement means flexibility in the contract terms, residual amount and repayment schedule. There are also fixed interest rates, tax breaks and GST benefits.

5.       Commercial Hire Purchase

The creditor secures and pays for a vehicle on behalf of the customer to hire it to them for an agreed time frame. During this time the customer is open to use the car, but remains a leaser only. Once the hire term ends and a total price including interest, but minus residual costs, the customer becomes the owner.

The benefit of CHP is that finance is secured against the vehicle which results in fixed and lower interest rates. Also a deposit can be used to minimise the regular payment amount as well as the balloon or residual payment.

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Car Loan Calculator – Ways to Pay Off Your Car Loan Faster

pay off car loan fastNobody likes debt. Sometimes it is a necessary avenue one must take to have freedom in your lifestyle. Securing a loan is done with the best of intentions, but changes in circumstances can be unforeseen and your schedule for repayments can be affected. Additionally, paying off the loan quickly is idealistic but the concept of how to do it can be overwhelming. Doing some sums with a car loan calculator may be a good thing to do.

Responsible credit lenders use car loan calculators to assess borrowers ability to repay a loan and to determine how much money you can afford to borrow as well as how much you can manage to repay. Getting ahead with your payments on a loan is possible, the first step is to begin researching ways to pay off your loan faster. Car loans can be the biggest issue for debtors as they tend to have higher interest rates and more finite payment requirements.

Here are 5 ways to pay off your car loan faster:

1: Extra Repayments

Use a car loan calculator to see if paying additional money towards the loan will continue to depreciate the total loan amount. Extra repayments will help to pay off both the capital and the principle amounts. This supplementary money will not only decrease the outstanding loan amount, but the interest you are paying on the loan as well. A car loan calculator can be found on the Aussie Loans front page.

2: Use a broker to find lower interest rates

A broker is an independent financial entity with a car loan calculator that has access to a variety of loans, lenders and conditions. They are able to professionally assess your situation and offer you a loan that suits your needs. Consulting a broker will ultimately lead to a lower interest rate and a change in the loan repayment amount. This change will reflect a decrease in the amount of interest you pay and reflect a higher repayment of principle.

3: Make minimum repayments increase

Minimum repayments are established to ensure that you pay off your loan and the associated costs like interest in the set amount of time. These repayments are also based on your financial situation. Increasing your repayment by reassessing your spending habits will go a long way to decreasing the life of your loan. Even attributing as little as $10 extra will improve the amount of principle you pay and reduce your interest.

4: Use lump sum payments from life windfalls

Sometimes we may be lucky enough to be awarded bonus amounts of money due to unforeseen circumstances or good luck. These are times when rationality can be overshadowed by whims of fancy. The obvious outcome of putting unexpected money onto your loan is a way to pay off your loan more quickly, but it also a way to gain money. By paying your loan in advance you are paying more off the capital than interest and it will downsize your overall loan dramatically.

5: Sound selection for selling

If you decide to sell your car before the loan term ends you may want to consider your car selection. Educate yourself about cars that hold their value. Financial circumstance can quickly change with redundancy or illness and you must be prepared. Securing a vehicle that will give you optimum resale value can give you the ability to pay off the outstanding amount without reaching into your own pocket, if you sell before the loan ends.