November 04, 2021 by Rebecca Crommelin
At the end of the year, we typically see car dealerships drop car prices to try to move stock and make way for the new year’s models. So it’s a great time to look at adding a new car to your Christmas list.
It's always wise to be prepared when you go car shopping, so you can have your budget in mind and all the negotiating power you can get in order to drive away with your dream car. This is where securing pre-approval for a car loan comes very much in handy.
While using the finance option offered by the dealership may seem like the easier option, it usually comes at a significant cost. So it’s important to do your research and chat to a broker before committing to anything to make sure you’re getting the best deal.
To help you feel armed with all the information before you hit the car yards, we've put together some hints and tips on dealer finance and how it really works so you can make the right choice when you buy a car.
Dealer finance - what are you really paying?
Dealer finance can seem like an easy option - often with very low rates, even 0% p.a. deals on offer. But you could end up paying far more than expected.
Lots has changed in the world of car buying. In the past, offering to pay cash was usually rewarded with a generous discount but not so much these days.
Dealerships know that by offering in-house finance they can get two slices of the pie - a profit on the sale of the vehicle, plus interest or commission earned on the car finance.
It makes sense why the finance guy is usually a regular fixture at the car yards these days.
But the problem is that dealers can be very light-on when it comes to explaining the details of your car finance.
The hidden costs to watch out for
Instead of being straight-forward on the interest rate, dealer finance tends to focus on the weekly repayments you’ll make on the new car. That means it’s up to you, as the buyer, to really push and ask about the exact rate so that you have a clear idea of the finance cost and whether it’s a competitive deal.
But even then, you still may not be getting the full picture. Dealer finance can be structured differently to a standard car loan, and can typically be a lot less flexible in terms of features. So just be sure to read the fine print, as you could find there is a ‘balloon’ payment included.
A balloon payment is a lump sum payable at the end of the loan term, and it can be worth around 30% of the original loan amount. It’s this payment that allows dealers to keep the repayments low throughout the loan. But it can be upsetting and financially challenging to find out that after years of paying off the car, you still owe a lump sum of money.
Want to know more? Check out our Money Chat video - ‘What exactly do you get with dealer finance?’
Convenience plus competitive finance - the benefits of using our team for your car loan
If you’re looking to buy a new car this holiday season, our team at Mortgage Choice in Perth CBD are more than just home loan experts. We can also help with car finance options that are both convenient and competitively-priced. This includes arranging pre-approval for a car loan, which allows you to set a budget for a new car, and provides extra negotiating power at the car yard.
Unlike the dealers who typically only have one finance option available, we have a range of car loan products available from our panel of lenders so we can find a loan that best suits your needs and budget.
Our team will review and take the time to understand your financial position to ensure your overall finances are taken into consideration and you are getting the best advice for your situation.
Better yet, for true convenience at Mortgage Choice in Perth CBD we also offer a car buying service. We will search through a national network of car dealers to get you the best deal, and because we buy so many cars, you benefit from our volume buying power to get a better price. We can also help you with the trade-in of your old vehicle.
Our team at Mortgage Choice in Perth CBD can help you find the right car finance and secure pre-approval for your loan. Let us help you add a new car to your Christmas list this year.
