Automotive Finance Tips for Private & Commercial Buyers

October 31st, 2022

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In the market for a new car? Buying for yourself or your business? In most cases, you’ll have to get a loan of some kind to finance it. Though it may be exciting to look at utes and cars to buy, saving money on finance can make all the difference to the bottom line. Here are some tips to finance your car, whether you’re a private or business buyer.

Setting a budget

You’ll need a clear idea of the sort of vehicle you’ll require for the job—or one that you want—as well as your budget. List your top priorities, including things like towing capability, safety features, fuel efficiency, and storage capacity.

You may now narrow down your selection of vehicles and determine how much you’ll need. This can also help when you’re looking for finance – knowing answers to your broker’s questions can be favourable.

New or used?

Buying new can actually mean lower interest rates due to the lower risk of the vehicle breaking down. Though it depreciates quickly, you can claim this back if you’re a business buyer. Used cars have lower prices but higher ongoing costs, such as maintenance and servicing.

Commercial finance – chattel mortgages

If you’re looking to get finance for a new work vehicle, a chattel mortgage (or hire purchase, which is similar) is the usual choice. A chattel mortgage is a business-oriented loan with tax perks and funding choices, suitable for financing your new car. For example, you can claim the GST, interest, and depreciation back.

Flexibility is its main virtue. A chattel mortgage might have a 12-month to 7-year loan period, or seasonal repayments as the case may be.

Next, you can finance more than the car’s value. Chattel mortgages let you to borrow additional money to pay for service, registration, insurance, and other expenses over time. This improves cash flow instead of paying for various on-road charges up front and using operational capital.

Chattel mortgages might have balloon payments, which reduces your repayments but requires a lump sum payment at the end of the loan.

More documentation may mean lower rates

If you can provide more documentation to support your application, brokers and lenders may pass on lower rates. This means demonstrating you’re a low risk – and lower risk means more competitive rates in kind. It may be worth gathering tax returns and profit and loss statements (or payslips) just for this purpose.

Loan pre-approval – your bargaining chip

You should also look into getting pre-approved for a car loan. This is the same as putting your car loan on hold until you find the right vehicle. Most brokers give you a month or two to find a car before you have to decide. It also gives you a price cap, which gives you an advantage with dealers or private sellers.

If you’re going to buy a used vehicle, it shows sellers you’re ready to buy (not just a tyre kicker.) With dealers, if you approach them right, you can get a car for your pre-approval amount – you can’t spend any more, so they have to meet your price. Dealers have to make sales – so use this to your advantage.

Remember, this advice is general in nature. Consult a financial adviser before taking on a loan of any kind.