Keep Your Business Moving Forward with Working Capital Finance

Looking to purchase a new car? Do you need financing? Would you like to avoid a deposit and keep payments down with a longer term? When you’re ready for that new car smell, a consumer car loan can be a great option.

How does a Consumer Car Loan work?

Consumer car loans (sometimes called secured car loans) are available with no deposit, and up to 7-year terms. They are used to finance new cars, and cars that are no more than 2 or 3 years old. They are typically used to purchase cars for private use but may be applicable in some business use situations.

With this type of loan, the finance company lends you the money to purchase your car. They secure the loan with the car. This security means the finance company can offer lower interest rates than you would expect with an unsecured loan. At the end of the loan term, the security on the vehicle is released by the finance company and you own the vehicle outright.

Consumer car loans are very flexible. Contract terms range from 1 to 7 years. The longer the term, the lower the monthly repayment. Interest rates are typically fixed giving you an agreed amount for repayments of the period of the loan. Variable repayment consumer car loans do exist but are not common.

Some consumer car loans allow for a balloon payment in the contract. This allows you to have lower monthly payments, and an agreed payout amount (balloon) at the end of the contract term. This option can be attractive if your monthly commitments have to fit into a tighter budget.

A consumer car loan is classed as a personal finance product. However, this type of loan may be the right choice for some business purposes. A tax deduction may be available if your business use qualifies. For more information about claiming vehicle-related tax deductions, please consult your accountant and/or visit the Australian Taxation Office (ATO) website.

Consumer Car Loan options

There are many loan products available for purchasing cars. Some are great for personal use, some for business. Consumer car loans are great options for people who are looking for mostly private use and do not have salary packaging options for a novated lease.

Consumer car loans provide flexible loan repayment terms from 1 to 7 years. Repayments can be further reduced by opting for an agreed larger final payment, often called a balloon payment.

You can access these loans with no deposit, or you can use an existing vehicle and/or a deposit to reduce the loan amount.

Because consumer car loans are secured, they offer very attractive interest rates.

Consumer Car Loan Interest rates and fees

Consumer car loans generally have fixed interest, although some finance companies offer a variable rate. Currently fixed rates around 6.5% per annum are available depending on your circumstances.

Some finance companies charge a monthly administration fee that can vary from $5 to $20 per month.

Loan establishment fees vary from $100 to $600.

Qualifying Criteria

To qualify for a consumer car loan, the finance company will need your personal and financial details, as well as the information on the car you have selected. Approvals can be “same day” if your application is acceptable. However, some finance companies can take up to 10 days. In some cases, you may be eligible to receive pre-approval. This allows you to go car shopping knowing how much you have to spend.

Application documentation checklist:

• Identification
  • Driver’s license or Passport or Birth Certificate
  • Some companies require secondary forms of identification such as Medicare card, Credits cards, Bank and Utility statements.
• Proof of income
  • Your employer’s details
  • 3 recent payslips
  • Your net (after tax) income
  • Minimum 2 years of tax returns (self-employed applicants)
  • Your credit history
  • Your assets
    • Real estate
    • Vehicles
    • Home contents
    • The investments (e.g. shares)
  • Your regular expenses
  • Your liabilities
    • Store and credit card limits and balances
    • Details of other loans and overdrafts
  • Car details (of the car you are purchasing)
    • Car make, model, colour and year
    • Vehicle Identification Number (VIN)
    • In some cases, you may need to provide the engine and/or chassis number
    • Registration number
    • Purchase price

How to apply for a Consumer Car Loan

• To ensure your loan is processed as quickly as possible, it is important to have all your application information and documentation ready.
• Your application is processed through a number of steps before the finance company is ready to release the funds, and you can collect your new car.
• The finance company will review your application. If everything is in order, you will get conditional approval. This typically happens in 1 or 2 days. At this point, you will usually be asked to provide the supporting documents to the finance company (e.g. identification, pay-slips).
• Once the finance company has the documents and are happy everything is in order, you will be asked to sign the loan documentation (a loan contract). The contract will state the amount you are borrowing, repayment terms, balloon payment (if applicable), interest rate and the total amount you will repay over the life of the loan.

Once you have selected your new car, and have the approval of the finance company, the car is purchased. The finance company pays the dealer directly and the sales people (or owner) let you know when to collect your vehicle. If your purchase is through a private sale, the finance company may give you a cheque made out to the seller or pay them directly.

Advice, tips and considerations

When considering any loan product, it is wise to check the options and the various pros and cons. The various considerations can be configured to get you a monthly payment to suit your budget. The team at Mortgage World Australia are lending experts and will help you understand all the options.

Some considerations include:

• interest rates, fixed or variable
• loan terms, 1 to 7 years
• monthly repayment amount
• balloon payments
• frequency of repayments (weekly, fortnightly, monthly)
• making additional payments

When comparing loans, watch for additional fees. Some finance companies offer lower interest rates plus monthly account or administration fees.

As the car is the finance company’s security, you will be required to maintain comprehensive insurance for the life of the loan. Proof of insurance will be required at the time of annual renewal. Some insurance products are more expensive for cars used as security.

Consumer car loans use the vehicle as security. The finance company has the right to repossess your car if you fail to make repayments.

Consumer car loans are only available on new and almost new vehicles. Typically, this means less than 3 years old.

Get The Expert Advice You Need

With almost 2 decades experience helping people to navigate consumer car loans, Mortgage World Australia are the only experts you should contact.  We have specialist know-how and offer our clients truly independent and tailored advice to ensure you get the right loan for your new car.

Let us take the hassle out of your next car loan. Get in contact today and talk to one of our friendly, expert staff.