With costs of living putting pressure on household budgets and business cash flow, interest rates on the rise and the RBA Governor saying more rises will be required, everyone is looking for ways to save without having to compromise on acquiring the goods and services they need. For buyers purchasing vehicles with a car loan, there are ways that can be considered to realise a saving on both private car loans and business vehicle finance.
In terms of motor vehicle finance, ‘save’ can have slightly different meanings to different buyers. The interpretation of ‘save’ meaning where the buyer is looking to reduce their car loan will determine how they may look to go about realising that reduction or relative savings.
The 3 primary objectives that most buyers may look to achieve are:-
- A cheaper car loan interest rate
- Saving on the total interest payable on the loan
- A reduced monthly car loan repayment
- Avoiding unnecessary charges
- Businesses optimising savings through tax deductions
We present the different strategies or approaches which can be used to work towards achieving those objectives. Strategies which can assist our customers in implementing when applying for their car loan.
Interest Rates
RBA Governor Lowe has stated that more interest rate rises will be coming and that means rises in car loan interest rates. Achieving the cheapest rate is a primary objective and can be pursued by addressing a number of issues.
- Having a good credit profile is key to being offered the cheapest interest rate. Lenders assess the credit worthiness or risk level of each applicant on an individual basis. Applicants with a good credit score typically are offered better rates.
- There are ways that individuals and businesses can work towards improving their credit score and rating. One simple way is to pay off any debts such as credit card balances or other loans before submitting an application for a new loan.
- Being circumspect about which lender you select to apply for your car loan. Interest rates vary across the lending market as you can see in our Compare Interest Rates for business cars chart. As brokers, we offer the benefit of being able to source the cheapest rate from across multiple lenders and negotiate on behalf of our customers. So don’t opt for a dealer offer or other option without first doing your research or just speak with us to save the time.
- Acting quickly with the purchase, if you can find the car you want, can ensure you secure your car loan before the next interest rate rises. To see what an increase could mean to your car loan, simply refer to our Commercial car finance Calculator.
- Ensure you secure a fixed interest rate so the rate and repayments do not increase when rates do.
Reducing Total Interest Payable
The total interest payable on a car loan is determined by the total loan amount and the loan term – the number of years to repay the loan. Reducing either of these amounts will reduce the total amount of interest paid over the loan term. And of course, so will achieving a cheaper interest rate as noted above.
This is significant to some buyers as it represent the real cost of the vehicle. An issue which may come into play when it’s time to resell or trade in the car.
The total interest can be reduced and hence a saving realised by:-
- Selecting a cheaper car to reduce the amount of the loan.
- Not opting for no deposit finance but paying a down payment to the dealer to reduce the amount of the loan.
- Requesting a shorter loan term. A shorter term means a higher monthly repayment but less interest payable.
When interest rates were at historic lows the total interest payable may have been less important. But as rates creep up, so does the prospect of this issue.
Reducing Monthly Loan Repayments
Savings can be interpreted by some buyers as achieving a lower monthly loan repayment. This may not actually mean you’ve saved on the cost of the loan or the interest, but it may be represent a saving on what you need to meet each month. A critical factor when balancing budgets and cash flow.
Referring to our Loan Calculator, you can easily see how the repayment term and the loan amount reduce or increase the monthly loan repayments. Requesting a longer loan term is a popular way to reduce the monthly loan commitments.
Some lenders will have set guidelines in regard to what they will approve in this regard. However, your Jade consultant will negotiate hard on your behalf to achieve a workable outcome. Businesses can also look at the balloon/residual amount to reduce repayments. Neither of these actions will save on interest but can reduce the monthly outgoing repayment which may be the objective for many buyers.
Avoid Unnecessary Charges
Some loans will attract pay out or exit fees when the loan is finalised before the end of the agreed loan term. This can occur if the owner decides to upgrade or resell the vehicle before the end of the loan term.
To avoid these fees, consider the timeframe of how long you intend to keep the vehicle when you are applying for the loan. By syncing your projected ownership period with the loan term, early payout fees may be avoided.
Purchasing Tips
Reducing the price of the car is a no-brainer in reducing car loan commitments. So how can that be achieved?
Here’s a few tips to keep in mind:-
- Prices of many goods including motor vehicles are on the up. New models coming later this tear and into next year are looking like having higher price tags due to inflation surging overseas and increased costs of freight and components. Avoid upcoming price hikes on the purchase price by purchasing ASAP.
- Check out demo models. These can be available at quite significant discounts. They can also be tricked-up with many accessories and options which you may not have necessarily been able to afford, but want. But do check the mileage. Some may only have a few hundred klms while others may have many more.
- Think carefully about adding accessories to the vehicle at the point of purchase. This will add to overall price of the car and can be included in the loan. But in some instances, it may be cheaper to source after-purchase accessories. Do your homework prior to purchase.
- Considering a used car as that should be cheaper than new? Think again. Due to the new car shortage the used car market has skyrocketed. The price may be way outside the actual value of the vehicle which can impact resale value down the line. Interest rates on car loans may also be higher for used versus new. So any savings may be wiped out in the loan. Request quotes on both options from us to assist with your buying decisions.
Saving our customers on their car loans and motor vehicle finance is our primary focus. Our consultants will work with you to secure the cheapest car loan that meets your application and requirements.
Contact Jade Car Loans 1300 000 003 for ways to save on your car loan.
DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.
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