Can someone explain car finance to me???

mr302xd · 02-12-2011, 03:43 PM

Hi all

Im thinkin of sellin up the falcon and going for a new more SUV type of car. I currently have a personal loan payin 16% interest!! I want to pay that out.

How does car finance work? I know if you want to sell the car you need to pay it out...thats bout it.....

Can you help me out?

Cheers Frank

Mr Hardware · 02-12-2011, 03:57 PM

Car finance is for if you want to pay more than what you bought the car for.

What do you want to know? There's about a dozen ways to secure finance for a new vehicle. Anywhere from maxing out your credit cards to a novated lease to borrowing against your home loan. And no you don't necessarily need to pay out the loan if you've sold the car, if it's just a personal finance type loan.

Personally, i've only ever paid cash for cars. People think I'm poor because I drive a heap of crap, but honestly, I have room in my budget to finance a Porsche or a GT-P if i wanted to.

mr302xd · 02-12-2011, 04:05 PM

Basically personal finance through a dealer. Not credit cards or anythin like that. I would be looking at upgrading when the lease is up.
I realise that i would be paying more. but at 16% with a personal loan...it cant get much worse than that!

TheSneakiness · 02-12-2011, 04:10 PM

Car finance 101:

- Find car
- Negotiate contract
- See finance people
- Meet criteria
- Leave
- Come back when car ready and be prepared to pay the purchase price plus interest compounded over period of finance.

If you trade the car in before finance period is up that will only take what the trade in price is off the loan and if you still owe money it's called negative gearing and will be added to new finance deal. DON'T EVER GET STUCK IN THIS SITUATION...

Mr Hardware · 02-12-2011, 04:12 PM

Well believe it or not it can get worse than that - I have seen other people pay almost 19%, and only in the past couple of years. Dealers often are more expensive to finance through than even a bank. Look at something like bankwest if you need a loan, you should be able to get a 'secured' car loan at around the 11% mark.

However if you hunt around properly you should be able to hopefully see a single digit interest rate.

Do you have a mortgage? Borrowing against it will provide you with pretty much the lowest possible rate of interest you can achieve in Australia.

Quote:

DON'T EVER GET STUCK IN THIS SITUATION...

Quite often people do because the kinds of cars people often finance also happen to be ones that quickly depreciate, and so paying off the car loan at the minimum rate over the maximum amount of years sees the car value sink a whole lot faster than the loan.

sd1800 · 02-12-2011, 04:13 PM

Do you use the car for work purposes? I use mine for work a percentage of work related travel so I went on a commercial hire purchase where I can claim on tax lease payments, depreciation, interest on loan aswell as all maintainance etc.

azz80 · 02-12-2011, 04:21 PM

have a look at ratecity, they compare all types of loans to get you the best rate.
If you have finance sorted before you see dealer, you can negotiate best deal and be prepared to walk out if they aren't coming to the party (so to speak).
http://www.ratecity.com.au/sem/car-loans

stevanford · 02-12-2011, 04:25 PM

Quote:

Originally Posted by Mr Hardware

Well believe it or not it can get worse than that - I have seen other people pay almost 19%, and only in the past couple of years. Dealers often are more expensive to finance through than even a bank. Look at something like bankwest if you need a loan, you should be able to get a 'secured' car loan at around the 11% mark.

Westpac had car loans at 9.95% last month. I told the dealer where I bought my G6ET if he could match it he can have my business. Needless to say, they matched it straight away.

Rodp · 02-12-2011, 04:27 PM

Quote:

Originally Posted by sd1800

Do you use the car for work purposes? I use mine for work a percentage of work related travel so I went on a commercial hire purchase where I can claim on tax lease payments, depreciation, interest on loan aswell as all maintainance etc.

Ugh. Done that once, will never do again. Talk about being reamed trying to get out of one of those early.

GT0132 · 02-12-2011, 04:27 PM

Quote:

Originally Posted by sd1800

Do you use the car for work purposes? I use mine for work a percentage of work related travel so I went on a commercial hire purchase where I can claim on tax lease payments, depreciation, interest on loan aswell as all maintainance etc.

On a commercial hire purchase arrangement you can claim depreciation and interest but not lease payments as its not a lease.

Mr Hardware · 02-12-2011, 04:32 PM

Quote:

Originally Posted by stevanford

Westpac had car loans at 9.95% last month. I told the dealer where I bought my G6ET if he could match it he can have my business. Needless to say, they matched it straight away.

Heh, I bet they did.

mr302xd · 02-12-2011, 04:33 PM

just personal use

Black F6 · 02-12-2011, 04:48 PM

Quote:

Originally Posted by GT0132

On a commercial hire purchase arrangement you can claim depreciation and interest but not lease payments as its not a lease.

Why not, sounds okay to me

Ben73 · 02-12-2011, 05:29 PM

Quote:

Originally Posted by MR BAXR6t

Basically personal finance through a dealer. Not credit cards or anythin like that. I would be looking at upgrading when the lease is up.
I realise that i would be paying more. but at 16% with a personal loan...it cant get much worse than that!

Guy at work got a personal loan for a car at 18% over 7 years.
Like come on. Can you really get that desperate for a new car that you agree to that.

TheInterceptor · 02-12-2011, 06:17 PM

Quote:

Originally Posted by Ben73

Guy at work got a personal loan for a car at 18% over 7 years.
Like come on. Can you really get that desperate for a new car that you agree to that.

Yep.

But i would pay it off within the first 2 years.

HULK EF · 02-12-2011, 06:54 PM

Quote:

Originally Posted by Ben73

Guy at work got a personal loan for a car at 18% over 7 years.
Like come on. Can you really get that desperate for a new car that you agree to that.

Pretty much what i did 3 years ago.
But at 16%

my repayments are $530 Per month.. + interest. Have seen that at about $160 Per month whilst still owing most of the money early on in the loan deal..

For the last year i have set up an "AUTOMATIC Debit" online from my nab account of a weekly $100 payed onto the loan on a monday as extra money to boost payment down of the loan faster.. Last months interest was down to $95.. and now owe $6900 total.. My initail loan amount was $25,000 and i used every bit of that when $22,000 on the car then had to pay the sale RTA TAX/insure/rego.. straight away.
Atleast my BF MK11 XR6 Turbo is now worth more than what i owe on her! and save a bucketload of interest instead of slowly paying her down over 7 years..
$25,000 loan = $38,000 over 7 year loan in repayments + interest.

mr302xd · 02-12-2011, 07:05 PM

Quote:

Originally Posted by HULK EF

Pretty much what i did 3 years ago.
But at 16%

my repayments are $530 Per month.. + interest. Have seen that at about $160 Per month whilst still owing most of the money early on in the loan deal..

For the last year i have set up an "AUTOMATIC Debit" online from my nab account of a weekly $100 payed onto the loan on a monday as extra money to boost payment down of the loan faster.. Last months interest was down to $95.. and now owe $6900 total.. My initail loan amount was $25,000 and i used every bit of that when $22,000 on the car then had to pay the sale RTA TAX/insure/rego.. straight away.
Atleast my BF MK11 XR6 Turbo is now worth more than what i owe on her! and save a bucketload of interest instead of slowly paying her down over 7 years..
$25,000 loan = $38,000 over 7 year loan in repayments + interest.

Basically same boat as me!

04redxr8 · 02-12-2011, 09:38 PM

Quote:

Originally Posted by Rapid_Axe

Car finance 101:

- Find car
- Negotiate contract
- See finance people
- Negotiate Interest Rate.
- Meet criteria
- Leave
- Come back when car ready and be prepared to pay the purchase price plus interest compounded over period of finance.

If you trade the car in before finance period is up that will only take what the trade in price is off the loan and if you still owe money it's called negative gearing and will be added to new finance deal. DON'T EVER GET STUCK IN THIS SITUATION...

You should in most cases be able to negotiate a better interst rate than what your offered. They usually have a standard rate they offer most customers, but if your credit rating is good, your income is good, and you can easily afford the car, then you should also get a better interest rate.

The interest rate is calculated on the risk. The more the risk, the higher the rate. If you ask the finance rep to submit a lower rate, the worst thing that can happen is the finance will be rejected. If that happens, revert to the original rate.

Good luck.

Racecraft · 02-12-2011, 09:44 PM

interest on a decpreciating asset = FAIL

Car loan on 20k + interest
+ Maintence and Mods
Never EVER EVER
= Residual of car @ term

Racecraft · 02-12-2011, 09:48 PM

Quote:

Originally Posted by HULK EF

Pretty much what i did 3 years ago.
But at 16%

my repayments are $530 Per month.. + interest. Have seen that at about $160 Per month whilst still owing most of the money early on in the loan deal..

For the last year i have set up an "AUTOMATIC Debit" online from my nab account of a weekly $100 payed onto the loan on a monday as extra money to boost payment down of the loan faster.. Last months interest was down to $95.. and now owe $6900 total.. My initail loan amount was $25,000 and i used every bit of that when $22,000 on the car then had to pay the sale RTA TAX/insure/rego.. straight away.
Atleast my BF MK11 XR6 Turbo is now worth more than what i owe on her! and save a bucketload of interest instead of slowly paying her down over 7 years..
$25,000 loan = $38,000 over 7 year loan in repayments + interest.

so $530 p.m + interest... plus the extra $100 a week you are tipping in to negate the 'interest'

omg that is over $220 p.w on something that everytime you look at it is worth closer to sfa....

SSVPom · 03-12-2011, 08:04 AM

IMO 16% sounds very high.. I'm paying around 9%, and went through a motor finance broker, like a mortgage broker really. Ring a couple up and they'll explain the differences between Hire Purchase / Commercial Hire Purchase / Chattel Mortgage / Novated Leasing / Personal Loans etc etc, and whether you should factor in a balloon payment after 3, 4 or 5 years to keep your monthly payments down or not. This idea is fine as long as your final balloon payment is less than the car is worth at the time, and you're confident you can sell your car before making the final ballooon payment FOR WHAT YOUR BALLOON PAY OUT IS - NOT LESS !!

Brokers will get the best deals from all of the big banks and finance houses, as they work on a similar way to mortgage brokers, they get a kick back from the institution they end up signing you too. You may pay start up fees, but you can be sure you'll be getting fairly impartial advice on the best loan for your circumstances with the best rates going round at the moment. Dealer finance is seldom as competitive as broker's sourced finance.

I've used the same broker 3 times now, and have successfully recommended them to two other colleagues at work.

In terms of personal circumstance, I receive a car allowance through work, and it makes sense for me to finance a new vehicle, and keep it no more than 3 years. In fact I have not kept any of them for that long, and changed over after 18 months to 2 years !! But always when the balance of the loan is less than the value of the car.

I sold my 2009 Holden SSV Sportwagon because I had a 4 year term with a $19k final balloon payment, but got a bit nervous when I began to realise that I wouldn't get $19k for it after 4 years ! I managed to sell it on for the balance owed when it was 2 years old, by selling privately for $36k (I was offered $28k trade in) Just be careful really.

Just my experiences there, if you can make head or tail of my ramblings !

belvo · 03-12-2011, 10:43 AM

also check out credit unions i think most of there car loans are under 9%.

martyk54 · 03-12-2011, 03:52 PM

Can't believe no one has really mentioned novated leasing. Personal loans over any longer than 3 years just add too much onto your purchase price... You'll end up paying up to 60k for a 40k car...

If you can afford the larger whack of $$ out your pay, which a lease will require, the benefits are infinitely better than personal loans. Either that or draw down off of your property and up the repayments to compensate (much cheaper interest rate). Personal loans are awful.

HULK EF · 03-12-2011, 05:56 PM

Quote:

Originally Posted by Racecraft

so $530 p.m + interest... plus the extra $100 a week you are tipping in to negate the 'interest'

omg that is over $220 p.w on something that everytime you look at it is worth closer to sfa....

worded it wrong.. thought some one may have thought that after i posted my reply.. $530 per month INCLUdes the monthly interest..

taxi driver · 03-12-2011, 08:43 PM

Ok so ive got ,like this fantastic investment oppotunity. Its only a 20k buy in. but since you dont have the money ill loan it to you.After interest and fees your 20k investments cost you 35. But 2 years later when you cash it in, its only wirth 5 or 10.
But since theres a car involved. Rather than considering yourself a victim of fraud, your lining up to repeat the process?
I can see how silly this is and ive made 2 spelling mistakes, ive noticed in this paragraph

taxi driver · 03-12-2011, 08:45 PM

And my sentance structures way off too

HULK EF · 03-12-2011, 08:56 PM

banks/money lenders are not a charity throwing cash away without some kind of incentive for them to lend in the 1st place.. (interest)

Nobody forces you to take up these money lending policies..

nstg8a · 03-12-2011, 09:04 PM

thats it, not everyone is on big money, and not everyone can save.

nothing wrong with financing a car as long as you go into it knowing exactly what your paying.

i know if i had kids to worry about i wouldnt hesitate to finance up a late model 'safe' car to keep them safer. but i dont so my pig of an au will do me for a bit longer.

nothing about cars is anything but a moneypit, its just the way it is.

look at it this way, is joe average any worse off financing his fg xr8 than his neighbor that pays cash for his, but then tips 20k down the drain modifying it?

joe will never sell it for a high enough price to cover what hes paid for it, and his neighbor will never make back the money spent modifying it... same same really.

its all personal choice, and i dont think because some choose to finance makes them any less intelligent.

GT0132 · 03-12-2011, 09:47 PM

Quote:

Originally Posted by nstg8a

thats it, not everyone is on big money, and not everyone can save.

nothing wrong with financing a car as long as you go into it knowing exactly what your paying.

i know if i had kids to worry about i wouldnt hesitate to finance up a late model 'safe' car to keep them safer. but i dont so my pig of an au will do me for a bit longer.

nothing about cars is anything but a moneypit, its just the way it is.

look at it this way, is joe average any worse off financing his fg xr8 than his neighbor that pays cash for his, but then tips 20k down the drain modifying it?

joe will never sell it for a high enough price to cover what hes paid for it, and his neighbor will never make back the money spent modifying it... same same really.

its all personal choice, and i dont think because some choose to finance makes them any less intelligent.

spot on.....well said and totally agree

mr302xd · 03-12-2011, 10:31 PM

Quote:

Originally Posted by nstg8a

thats it, not everyone is on big money, and not everyone can save.

nothing wrong with financing a car as long as you go into it knowing exactly what your paying.

i know if i had kids to worry about i wouldnt hesitate to finance up a late model 'safe' car to keep them safer. but i dont so my pig of an au will do me for a bit longer.

nothing about cars is anything but a moneypit, its just the way it is.

look at it this way, is joe average any worse off financing his fg xr8 than his neighbor that pays cash for his, but then tips 20k down the drain modifying it?

joe will never sell it for a high enough price to cover what hes paid for it, and his neighbor will never make back the money spent modifying it... same same really.

its all personal choice, and i dont think because some choose to finance makes them any less intelligent.

tru. Well said