How to get a cheaper car loan

How to get a cheaper car loan

Many people don’t realise that the loans available direct from your car dealer are not always the most competitive.

Whether you’re buying a new car for the family, or a fleet for your business, the information in this blog will help you.

Here’s how you can save more on your car loan, without the legwork.

Why car dealer loans may not be the best

If you’ve ever purchased a car from a dealer, you’ll probably remember being asked to meet their ‘finance specialist’. This person probably recommended a loan product to pay for the car, and they probably offered to sign you up on the spot for it.

The car dealer may have been aligned with a specific lending institution, or they may have had their own lending arm. For example, Lexus Australia encourages its customers to secure finance through Lexus Financial Services.

It may seem easy to use the dealer’s finance recommendation, but it’s usually not the more affordable solution. This is because your dealer only has access to a limited number of loan products – in some cases, only one or a few.

As a result, you’re buying a product that has zero competition. And when there’s no competition, you’re going to pay more. This set up is very similar to the banks, which have only limited loan products available to borrowers.

Like the banks, the car dealer also has an interest in selling their own finance products to you, because profits stay within their organisation, and in some cases, commissions are received.

In short, they have a vested interest in selling their loan product, not in getting you the most affordable deal with the best terms.

What’s the solution?

A car finance broker is not aligned with any lender, and looks at hundreds of different vehicle loans before pin pointing one or a few competitive options for you.

They are like mortgage brokers, but their specialty is vehicle finance.

A good vehicle finance broker is your finance advocate. They want to get you the most competitive loan, so you come back to them for your next vehicle, and the one after that.

They’re also across all of the different car loan products available in Australia, so they know about the big lenders and the small, more niche ones too. Often, these niche lenders have better terms and rates than larger ones, so there can be greater savings right there.

A vehicle finance broker also takes care of the necessary paperwork, so you can stay focused on finding your perfect car. This includes liaising with your current lender to transfer anything existing on your previous car loan (if required), and negotiating on your behalf with the new lender.

Ultimately, a vehicle finance broker is another member of your finance broking team. They work just like a good mortgage broker, and should only recommend a loan that you have the capacity to repay, within terms, that also saves you more.