Current Australia Car Finance Market
For a long time we have seen the car finance market flourish. With low unemployment, positive financial futures and a general feeling of financial security, there have been so many car loans available that almost anybody could get car finance. Then along came the biggest economic downturn for many years, and the brakes have been well and truly applied to the global economy and in particular lending markets.
What does this mean to the regular person on the street who wants to borrow money a new car? Well the main difference that has happened is that lenders have tightened their lending criteria. Due to economical uncertainty, higher living costs and higher forecast of unemployment, lenders are more cautious with who they will lend money too. They feel the risk of defaults is higher, so they are more careful when approving loans for cars, boats, trucks and other equipment.
The follow on affect from this is that the amount of brokers who can get you a cheap car loan has now shrunk dramatically. This is particularly true when the loan being applied for is a non standard loan. Bad credit loans, self employed loans, no deposit loans and other non conforming car loan options have become harder and harder to qualify for.
Many of the major lenders, such as banks and big finance companies, now restrict the number of non conforming car loans they are offering to the market and particular brokers each month. So A large number of finance brokers find it very difficult to exist in today’s environment. They simply cannot place a high enough volume of loans to make ends meet.
This reduction in competition might sound bad for the consumer but it is not necessarily the case. It has become more important for those to do their homework. Interest rates are no higher than before, as long as you can find the right broker to place your loan. It is still likely to be more expensive to go directly to a bank or lender directly.
One trap to avoid is to resort to disreputable lenders or ‘fantasy loans’ that claim to be offering 0% interest, or two years interest free. Nobody lends money for free and you should be aware of that from the beginning. Any loan mentioning such offers have a catch, potentially a very costly one. You should stick to established respected lenders who can still offer a wide enough amount of car finance options to suit your situation. One that can evaluate your financial situation and future economic position to and then suggest the cheapest loan option available for the car you would like to buy.
When working out how much you can afford to borrow, more variables should be considered than just the interest rate. You need to allow for the the other necessary costs of registration, car insurance, any other necessary insurance, running costs, possible repairs, the potential of rising oil prices, and any administration cost associated with the loan.
These costs should be included when calculating the amount of your monthly. This will help you calculate how much you can afford to borrow and also prepare you in advance for changes to your daily budget.
A good car loan broker will have a wide variety of loans based on your economic position. larger their panel of lenders they can utilise or the bigger, better quality their borrowers are, the better opportunity you have to get a good loan. Smaller brokers in the current finance market will always it increasingly more difficult to place a loan that is actually right for you, and may convince you to take a loan because it is one they still have the ability to sign.
One word sums up the current world economy… erratic. This means you should also be searchingfor a flexible loan, especially for new cars. Check the conditions if you want to pay off your car loan in a lump sum or refinance to a different car loan.
Having a loan already approved for the amount you want to borrow also gives you more buying power when you go to buy your car. You know your limits and the seller will need to negotiate to meet you demands. It will also take away their ability to trick you into using finance companies they are associated with, whose conditions may not be suited to you.
It is more important than before to do your homework when applying for a car loan. Stick to the trusted established brokers with strong financial backing and avoid offers of free finance or convenient convenience loans with lots of fine print and conditions.
