motorculture
MotorCulture
How to get vehicle finance? Vic Willey of SV Solutions Pty Ltd shares some thoughts on this subject.
The problem is the very large sum of money between you and the car and you think it's an impossible target.
Think again - but you need to know what's available, what's required and more importantly, what it's going to cost.
Gauging the size of the car loan industry can be reflected by lenders such as St George and Esanda that each write around $220 million of car loans a month. So there's money available. These are the steps to get your hands on some.
CREDIT HISTORY
The first step is your ability to repay. Your credit history is critical to successfully buying any car on finance.
If you have a bad credit history - a cupboard full of irregular payments, none payments and even a repossession - you have a rocky time ahead getting finance and even then, you'll go to the top of the interest rate scale.
But it's not the end of the world - "If you pay on time for 12 months you can re-establish your credit rating and get lower interest rates," says Vic. "History is that - history. You can turn your credit rating around and that will make life easier and cheaper for the future."
CAR FINANCE
Financing your car - as distinct from paying with cash - is generally the quickest, easiest and most expensive way to get wheels. Recognise that and you're on your way.
One of the biggest attractions of financing through a dealer is that the money business is done virtually on the spot, in the dealership office. That makes it quick and easy, but not necessarily the best option for you and your dollar.
LOANS TYPES VARY
Fixed rate loan agreements are the most common finance arranged for vehicles.
Vic says the recent National Consumer Credit Protection Regulations - which licences financiers and monitors car dealers - had led to banks tightening their criteria on personal loans and that placed more business with the specialist car loan finance companies.
"If the customer has no credit rating, or has a poor rating and has a loan default, we can organise for an existing loan to be paid out," Vic says.
"A loan can be tailored for borrowers on low income, or low disposable incomes. For example, the loan period can be extended so monthly repayments are smaller. That also improves the chances for the loan being approved."
A high credit rating can mean lower interest rates and therefore lower repayments. According to data from loan comparison groups such as Cannex, a low-risk, high credit rated borrower could, for example, have an interest rate of 10 per cent for a secured loan.
But if the loan is unsecured - that is, no collateral is required on the car - then the same person could pay 14 per cent. Commercial rates are lower. A low risk loan could be charged at 7.8 per cent as a base rate and yet as the risk increases, the interest rate may grow to 16 per cent.
REPAYMENT CAPACITY
Financiers use a point-score system to assist in determining repayment capacity. This can be used in conjunction with the Henderson Poverty Index that is a sliding scale taking into account marital status, income, disposable income, length of employment, number of children and so on. Buyers should be aware that used car loan rates are more expensive than new car rates.
"That's based on the car's age," Vic says. "There are other variables as well, mostly affecting insurance, such as the driver's age and driving record, type of car and so on."
Generally, a used car buyer can expect to pay 2-4 per cent more in interest rates than a new-car buyer.
With over 25 years commercial lending experience, SV Solutions Pty Ltd will find the most appropriate solution for your business and personal finance needs. For more info, visit: http://www.sv-solutions.com.au/ or call Vic on 0423 409 483
The problem is the very large sum of money between you and the car and you think it's an impossible target.
Think again - but you need to know what's available, what's required and more importantly, what it's going to cost.
Gauging the size of the car loan industry can be reflected by lenders such as St George and Esanda that each write around $220 million of car loans a month. So there's money available. These are the steps to get your hands on some.
CREDIT HISTORY
The first step is your ability to repay. Your credit history is critical to successfully buying any car on finance.
If you have a bad credit history - a cupboard full of irregular payments, none payments and even a repossession - you have a rocky time ahead getting finance and even then, you'll go to the top of the interest rate scale.
But it's not the end of the world - "If you pay on time for 12 months you can re-establish your credit rating and get lower interest rates," says Vic. "History is that - history. You can turn your credit rating around and that will make life easier and cheaper for the future."
CAR FINANCE
Financing your car - as distinct from paying with cash - is generally the quickest, easiest and most expensive way to get wheels. Recognise that and you're on your way.
One of the biggest attractions of financing through a dealer is that the money business is done virtually on the spot, in the dealership office. That makes it quick and easy, but not necessarily the best option for you and your dollar.
LOANS TYPES VARY
Fixed rate loan agreements are the most common finance arranged for vehicles.
Vic says the recent National Consumer Credit Protection Regulations - which licences financiers and monitors car dealers - had led to banks tightening their criteria on personal loans and that placed more business with the specialist car loan finance companies.
"If the customer has no credit rating, or has a poor rating and has a loan default, we can organise for an existing loan to be paid out," Vic says.
"A loan can be tailored for borrowers on low income, or low disposable incomes. For example, the loan period can be extended so monthly repayments are smaller. That also improves the chances for the loan being approved."
A high credit rating can mean lower interest rates and therefore lower repayments. According to data from loan comparison groups such as Cannex, a low-risk, high credit rated borrower could, for example, have an interest rate of 10 per cent for a secured loan.
But if the loan is unsecured - that is, no collateral is required on the car - then the same person could pay 14 per cent. Commercial rates are lower. A low risk loan could be charged at 7.8 per cent as a base rate and yet as the risk increases, the interest rate may grow to 16 per cent.
REPAYMENT CAPACITY
Financiers use a point-score system to assist in determining repayment capacity. This can be used in conjunction with the Henderson Poverty Index that is a sliding scale taking into account marital status, income, disposable income, length of employment, number of children and so on. Buyers should be aware that used car loan rates are more expensive than new car rates.
"That's based on the car's age," Vic says. "There are other variables as well, mostly affecting insurance, such as the driver's age and driving record, type of car and so on."
Generally, a used car buyer can expect to pay 2-4 per cent more in interest rates than a new-car buyer.
With over 25 years commercial lending experience, SV Solutions Pty Ltd will find the most appropriate solution for your business and personal finance needs. For more info, visit: http://www.sv-solutions.com.au/ or call Vic on 0423 409 483
