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Automotive Finance Tips for Private & Commercial Buyers
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.
Selling your car concierge-style…
If you’re buying a new car, you know where to go. In fact you’re already here – drop a request on Private Fleet and the expert consultants will do the rest for you, pain-free, stress-free and at the best financial result.
However when it comes to just selling a car, there’s the age old dilemma – should you sell it privately to eventually maximise your financial return or sell it to the trade (wholesale) to minimise the hassle.
If you have a prestige car and are located on the East coast of Australia, there’s now a third option that we highly recommend checking out.
Summon are a new concierge-style prestige car selling service. They take away all the hassle and put your car out to the public market to maximise your return. But not only that, they’ll likely do it better.
Quality photos, knowing where to place the ads (and how to write them), pricing it correctly all mean you’re better set up to get a result and that’s before they take over all the hard yards of preparing for sale, inspections, haggling and getting the all important deposit.
It comes at a cost, of course – they have two options both involving a initial listing fee (no doubt some sort of a commitment involved there so they aren’t wasting their time with unrealistic sellers) and % of the eventual sales price. From their site:
- Premium Package: $450 upfront and 4% commission
- All Inclusive Package: $950 upfront and 6% commission
Clearly for a $10K runabout, this probably isn’t going to stack up – in fact they start at a market price of $50K. But if you’ve got a prestige car, it wouldn’t take much of an upside to more than pay for itself.
We’ve got no affiliation with Summon other than having spoken to them at length they seem the real deal. Professional people, genuinely out there to make a different and try to help solve one of the car industry’s age-old problems and their reviews look pretty damn good too. Drop a comment below if you give them a go, we’d love to know.
5 Ways Car Makers Reduce Price Competition
It’s a murky world the Australian automotive industry. Always has been and probably always will be. When big, emotional purchases are on the table and there’s a complicated system of sales distribution, it’s always going to be difficult for the consumer to work out what’s a good deal.
The ‘problem’ is you can only buy a new car from an official new car dealership, licensed by the manufacturer. Unlike almost any other product there aren’t new car resellers, independent distributors or outlets. The actual purchase must always take place at a dealership and that dealership must be bound by conditions and obligations bound by the carmaker. This means the manufacturer is in a unique position to influence the sales process and therefore the competition.
Of late there’s been significant interest from the ACCC and the government into what this means for the consumer in terms of pricing competition and transparency and also for the long-suffering dealerships.
In June, the ACCC announced they were examining the competition risk from the merger of the two biggest new car dealer groups in Australia
“The ACCC’s preliminary view is that the proposed acquisition is unlikely to substantially lessen competition for the supply of new cars in Melbourne, Sydney and Brisbane or nationally”
In August, the Morrison government announced a reform entitled ‘Delivering a fair and competitive car retailing sector’
“We have heard the concerns of those within the sector and are committed to creating a level playing field. It’s about ensuring everyone gets a fair go, including our small and family car dealers,”
This is squarely addressing the influence that car manufacturers have on the new car marketplace in particular with respect to their franchise agreements.
Private Fleet, having relationship with over 1,000 new car dealers, is uniquely placed to have recognised and worked through many of these issues over the last 20 years. Here are 6 ways the car makers restrict competition:
1) Don’t Advertise Discounted Prices
Most independent businesses are unrestricted when it comes to what price to set for their products and services. After all, it’s their profit margin so makes sense that they can vary their pricing structure to suit their needs. Not so with new cars. If a dealer advertises a new car at below RRP (or current national driveaway special), they will risk the wrath of the car manufacturers and likely be instructed to take the ad down
2) Don’t Advertise In Other Territories
Car makers allocate each dealer a ‘PMA’ or Primary Marketing Area. If dealers advertise outside of these defined boundaries then, again, they’ll get a tap on the shoulder from the manufacturer.
3) Discourage Working With Brokers or Car Buying Services
Hits close to the bone this one. But for almost all of our 20 years OEMs have put pressure on dealers to only sell directly and not through intermediaries who aren’t contracted to the sales and pricing conditions as the dealers themselves. Thankfully, although dealers would never dare to publicly challenge this, in practice they have a business to run and overheads to meet so this ‘advice’ is generally ignored. Here’s an extract from one of Toyota’s many dealer communications on the subject.
“Toyota is aware that new vehicle brokers and buyers agents may be acting as intermediaries between customers and Toyota Dealers. This practise is of concern to Toyota. Toyota strongly believes that Toyota Dealers are best placed to fully service the needs of Toyota customers.”
4) You Can’t Sell Brand-X if You Sell Our Brand
More and more there are multi-franchised dealers across Australia. This makes sense especially for consumers as it makes it easier to compare models & prices in one spot. However certain manufacturers will throw their weight around and threaten to rescind a franchise agreement if a dealer looks to take on a new ‘competing brand’.
5) No Trucking of Cars on Delivery
Dressed up as being the optimal delivery process, certain manufacturers (particularly prestige brands) insist on a personal handover between dealer and car buyer at the time of delivery. But in practise this limits the scope of where a buyer can buy from unless they are prepared to travel a huge distance to compare options. Consider Lexus buyers in Perth – there’s one dealer in WA. Interstate dealers are prohibited from trucking cars across the country so where’s the competition there?
6) You Must Spend $$$ to Promote our Brand
Once a dealership is ‘granted’ a franchise, along with the agreement is a heavy obligation towards supporting the manufacturer’s brand even over the actual dealerships brand. Want to sell plenty of cars without the fancy dealership overheads? Nope, sell our cars and you’ve got to spend X million on an ultra-fancy forecourt to help fly the flag. No efficient volume sales channels here please.
Without exception all these restrictions lead to less pricing competition for the consumer. But what about the poor old car dealer? Yes, I’m serious! The dealers have their pressures and obligations to meet, staff to pay and doors to keep open. If they were allowed to run like normal independent businesses, what impact would that have on prices? What efficiencies would we see flowing through the whole current sales process?
NEXT: Import restrictions, dealer ‘holdback’, legal intimidation…
$20K Small Business Tax Break End In Sight
Can you believe it’s been two years since the government announced the ‘Instant Asset Write-off” incentive in 2015?
To recap, the incentive runs as follows:
Any small business (turnover <$2m) buying an asset under $20,000, is eligible to write off 100% of the value immediately rather than claim depreciation over the following years. This was (and still is) an unprecedented scheme in terms of its generosity for small business (the previous instant asset write off threshold was just $1,000) and $1.75 billion was set aside in the 2015 budget to cover the incentive.
More Info: http://www.abc.net.au/news/2015-05-13/budget-2015-small-business-tax-break-explained/6466066
However, all good things come to an end and this 2-year incentive we be no longer from 30th June 2017.
What this means is that, if you are a small business, and there’s any sort of asset purchase you’re considering under this threshold, then act NOW to save yourself literally thousands of dollars compared to a post 30 June purchase.
Naturally, our interest and expertise is in cars and these days there are hundreds of models of vehicles that fit under this threshold. We would love to help any reader with such a purchase but above all, whether you buy through Private Fleet or directly from a dealer, we urge you to act now! Do not leave it too late. The purchase must be finalised before 30th June (paid for and delivered) and, with long waiting times for many models, it would be easier than you think to miss out.
I remember several years ago when another related incentive was offered and the dozens of disappointed potential buyers we spoke to who had left their run too late. Order today for delivery mid June, if you like but get your name on the list! Good luck!
Level 2, 9 Help Street