28 July 2020

Car Lending Made Simple

Car Lending Made SimpleCar lending made simple at Hewcorp FInance

Buying a car is an exciting time for most people.  There’s nothing like looking out the window and seeing a shiny car parked in the driveway, before jumping in and heading out to the open road.  But, before you get too excited, it’s important to understand the steps and a few pitfalls involved in buying a car, and getting finance for it.

The car finance market is extremely crowded with a sea of lenders offering different rates and features.  It can be a confusing process, especially with many car dealers offering so called 0% or 2% type financing options.  You’ll need to think carefully before committing to a car loan, and determine what’s genuine and what ‘attractive offer’ may end up costing you a lot more.

There are several ways to finance your new vehicle, so let’s take some time and explore them.

Chattel Mortgages

A popular and common method of financing a vehicle purchase, (new and used) where you have possession and use of the vehicle in return for making the regular payments to the lender.  The lender takes a security over the vehicle in exchange for providing the loan funds.  This is like a home loan and mortgage, so, if you don’t make the repayments, the lender may repossess the vehicle.  The loan is finalised once the final payment has been made.  There are a range of features and benefits relating to this finance option including balloon payments, loan terms and potential tax benefits.

Finance Leases

This method of financing a vehicle can be used for both new and used vehicles.  The vehicle is owned by the lender, and the customer has possession of it (also registered in your name) in return for making regular lease payments.  Once the final payment has been made, including any balloon payment, the ownership of the asset transfers to the customer.  There are a range of features and benefits relating to this option including loan terms and potential tax benefits.  If you are self-employed and own a business, a Finance Lease can be a tax effective way of financing a vehicle under some circumstances.Is a finance lease right for you? Check out what Finance Options are available.

Personal Loans

All lenders will place restrictions on the type, age, and value of vehicles they are prepared to finance through one of the above methods.  In some cases, such as the purchase of an older vehicle, (7+ years old) the buyer may need to finance it through a standard personal loan.  Personal loans aren’t secured against the vehicle, and consequently, the rate is usually higher than a chattel mortgage or lease.  Contact Hewcorp Finance to discuss your circumstances, and whether a personal loan is the only option available to finance a vehicle.

0% Finance Loans

When it comes to 0% or 2% type car loans, the old saying of ‘buyer beware’ applies.  Car dealers and their lenders are in business to sell and make profit.  That is entirely appropriate, so, a lender providing a 0% finance loan must earn their profit through another means.  Some of the methods used by these finance providers and the dealers associated with them include:

  • Factoring the finance cost into the ‘purchase price’ of the vehicle.
  • Increased ‘application and establishment’ fees and charges.
  • Calculating the interest on the total debt (not on reducing balances) so that paying off the loan early only saves you time with no interest savings.

………amongst others.

The process of buying and financing a vehicle can be complex, but it doesn’t have to be that way.  It’s important you have professionals working for you to make the process as seamless as possible, and to deliver a positive outcome.The Hewcorp Finance team delivers real service, peace of mind and a level of professionalism you can count on.

Hewcorp Finance provides professional home, motor vehicle, truck, caravan, marine and asset finance services to customers in Redland Bay, Bayside suburbs, and the greater Brisbane region.  You can follow Owen on LinkedIn LIKE us on Facebook, or view information about car finance on our website.
Written and Published by  www.presentprofessionally.com.au