TIPS WHEN CHOOSING A CAR LOAN

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1 TIPS WHEN CHOOSING A CAR LOAN

2 1 Dealer Finance If you re buying your vehicle from a car dealer, you may consider dealer finance to be a convenient and simple solution to the problem. Just be aware that this convenience can cost you. Dealer finance can sometimes have a higher interest rate than the more competitive products from financial institutions. It can also come with extra terms and conditions, such as a fee for paying out the loan early. Don t be fooled when it comes to low interest rate offers from some dealerships as this might just be what it sounds like, too good to be true. Make sure to read our Truth About Low Interest Car Finance for more information on this topic. There are many other options available to you, so take the time to shop around before signing and committing to anything.

3 2 What to look for in a loan The main thing to remember is not to rush your decision and shop for your loan before you start to look at cars. Some of the variables you need to consider include: TERM OF THE LOAN: Personal or car loans often have a term of between one and five years, although some can run for up to seven years INTEREST RATES: These can vary wildly depending on the term of the loan, financial institution offering the loan, loan amount and whether you want a variable or fixed rate OTHER FEES AND CHARGES: Check the fine print for establishment fees, annual fees, fees for paying out the loan early and fees for defaulting on a payment INSURANCE: Does the loan require you to take out insurance to cover missed payments? REPAYMENTS: Can you make repayments weekly or fortnightly? This can quite often save money over the term of the loan Finally, only commit yourself to a loan that you are confident you can repay.

4 3 Advantages of using a finance broker As well as taking the hassle out of finding the right loan, a car finance broker can possibly help you save a few dollars in the process. The buying power of online brokers usually means that they have access to particularly low rates across most banks and lenders in the market. Not only can they potentially save you some money, they are also able to take the stress out of the whole process. Whether you ve already chosen a car, or are just doing your homework, a finance broker can help to identify your personal profile and preferred loan option and then match it with the best solution on the market. 4 Is it time to replace your motor vehicle? Through us, you will have access to very competitive prices, on all new vehicles for either business or personal requirements. For more information or a FREE review of your vehicle financing needs, contact Mark Connolly on or markc@msitaylor.com.au

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6 5 The truth about low interest car finance Low finance rate deals are being offered by an ever increasing number of car dealers. Rates as low as 0.50% have been available in recent times. Firstly, there is no doubt the interest rate being advertised to finance the vehicle purchase is legitimate. However, these finance offers are typically part of what the industry calls a subvention finance program as the interest rate for the finance package is being subsidised by the dealer or manufacturer out of the profit made on the sale of the car. Before you rush out and sign on the dotted line, it s important to understand what is happening behind the scenes with these low rate finance packages. Let s look at some simple scenarios to identify the difference between two different loan options. Scenario 1 Scenario 2 Pete is looking to purchase a new $35,000 car which is being sold in conjunction with a low interest finance rate of 1.9%. The loan term is 48 months with a nil residual at the end of the contract. Jim on the other hand, negotiates a cash sale with the car dealer leaving the low interest rate finance offer out of the equation. Instead, he negotiates a 10% discount off the asking price subject to finance arrangements. Once the discounted purchase has been negotiated, he then contacts his finance broker and arranges for a loan at normal market rates which means he ends up paying lower monthly repayments over the term of the finance contract than what Pete is paying through obtaining low interest rate finance.

7 Scenario 1 Scenario 2 Pete with low interest finance Jim discounted cash sale and loan at normal market rates Amount borrowed $35,000 $31,500 Time to repay 48 months 48 months Interest rate 1.9% 5.2%* Monthly repayment $758 $728 Total amount paid over 48 months $36,375 $34,957 * Commercial vehicle leasing rate. Standard consumer rate may vary slightly. REMEMBER: The higher the purchase price of the car, the more you will pay for items such as GST, stamp duty and potential luxury car tax. Even though Pete had a low interest loan, he paid more for his car which meant the monthly repayments and total amount repaid was more than Jim who managed to arrange a discount and obtained a loan from a lender at standard interest rates. In conclusion, the old maxim that there is no such thing as a free lunch certainly applies to low rate car finance deals. We have the ability to obtain competitive vehicle pricing for business owners and personal clients at no cost to you. For more information, contact Mark Connolly on or markc@msitaylor.com.au

8 About MSI Taylor We have a dedicated Pharmacy Services team that has extensive pharmacy knowledge and is able to provide the skills and tools required to successfully compete in an environment that requires increasing efficiency, productivity and innovation. Our Pharmacy Services team works with a network of pharmaceutical industry professionals, including major wholesalers, software providers, lawyers, finance providers, tax specialists, financial planners and insurance consultants, to assist pharmacists toward managing a successful pharmacy business. The team is lead by firm partner, Matthew Harris, who also works with the Pharmacy Guild of Australia as a qualified Quality Care Assessor. We also offer a range of services for individuals ranging from accounting and tax, financing, risk insurance and wealth creation. For more information on MSI Taylor, please visit MSI Taylor is a member of the MSI Global Alliance which is an international association of independent legal and accounting firms. With over 250 carefully selected member firms in more than 100 countries, MSI is one of the world s leading associations. All members share a common desire to provide partner-led, personal, value for money solutions to the cross-border challenges faced by businesses. Level 9,Toowong Tower 9 Sherwood Road Toowong Qld 4066 P F Level 7, The Rocket 203 Robina Town Centre Drive Robina Qld 4230 P F mail@msitaylor.com.au