There are many decisions to be made when buying a new car with finance. One major question is around the deposit – do you buy straight away and apply for no deposit car finance or wait while you save for a deposit? Jade Car Loans provides resources to empower buyers to compare no deposit car finance with making a deposit to help with deciding on the right time to buy. In this article, we cover how a deposit affects the car loan, the eligibility for no deposit finance, present issues for buyers to consider, and remind buyers to use our calculator to easily compare loan options.
Know the Effects of Deposits on Car Loans
Making a downpayment to a car dealer and borrowing less than the total purchase price clearly reduces the loan amount compared with making a lesser or no deposit. A smaller loan means less total interest payable and a lower overall vehicle acquisition cost.
The benefits of borrowing less than the value of the vehicle may include being approved for a higher borrowing limit which may enable purchasing a better car, and possibly a better interest rate. With the loan to value ratio (LVR) lower when paying a deposit, lenders may see the application as a lower risk and offer a better rate.
Eligibility for No Deposit Car Finance
No deposit car finance is available on Secured Personal Car Loans for private vehicle buyers, subject to lender approval. With the vehicle used as collateral, lenders have the guarantee of recouping the funds should be the borrower default.
To be eligible for no deposit motor vehicle loans, applicants must be approved by lenders and the vehicle is taken into consideration in the process. Approval is more easily given to businesses than for individuals purchasing vehicles for private use. Private buyers will be assessed for their borrowing limit, with lenders considering the LVR, financials and credit profile.
New vehicles can more easily be accepted for no deposit finance compared with second-hand vehicles. Lender approval criteria does vary across the market. We can assist by selecting the lender that best matches the applicant’s profile and requirements.
Save More or Apply for No Deposit Car Finance?
There are a number of key issues to consider when deciding whether to buy now with no deposit or wait while you save more for a deposit.
For starters, consider what is happening in the motor vehicle market. By how much could the price of the model you are consider increasing over the time you are saving for a deposit? A price increase which may increase the loan amount required, regardless of downpayment.
On the ‘wait and save’ side, having a larger downpayment reduces the amount required for the financing, which may attract a better rate offer, as well as requiring less each month to repay the smaller loan. Provided the vehicle price does not increase significantly over the saving period. Buyers can always consider a different model, more suited to their price range and borrowing limit.
If you plan to trade-in your current vehicle, the value of your vehicle could decrease over time, leaving a greater differential to cover with finance.
The interest rate situation will be a key consideration for many buyers. At its September meeting, the Reserve Bank (RBA) once again held the cash rate steady. While many are anticipating and waiting for a rate cut, that may not start happening until 2025. The markets appear to have a range of expectations on the first rate cut with forecasts ranging from December 2024 through to May 2025.
If holding off on securing a car loan until rates are reduced, exactly how much could you save? Consider by how much the RBA may cut the cash rate and how much lenders in the car finance market may then cut their rates, and use a finance calculator to see the differential with current rates.
Could you be better off by buying now possibly with no deposit car finance and putting the amount that is intended for savings towards loan repayments?
Another issue is how important is it to have a new vehicle now with no deposit car finance? Will the current vehicle require significant repair and maintenance expenses while waiting to save for that deposit? Many new vehicles come with free servicing periods.
Some of these issues relate to specific, individual personal financial circumstances. Individuals requiring advice on the personal financial position should speak with an accountant or financial advisor. Our role as a broker is to source the best loan, not to advise on personal financial circumstances.
Tool to Compare Deposit and No Deposit Car Finance
To assist in making these critical buying decisions, buyers can use our Car Finance Calculator to compare repayments on no deposit car loans with repayments when a deposit is made. Comparisons may also be made with different interest rates to assist with decisions around purchase timing. Buyers can calculate estimates to see how much less the monthly repayments would be at lower interest rates.
To discuss your options for no deposit car finance and for no obligation quotes to assist with timing your car purchase with finance, contact Jade Car Loans 1300 000 003.
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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