4 Common Mistakes in Car Financing and How To Avoid Them

Buying a car is part of every Australian’s dream – it’s probably a really close second to owning your own home!

So, when it comes to vehicle finance, you want to make sure that you’re getting the best deal when you finally get your very own car. However, car financing is an intricate process, and it’s easy to get lost or overwhelmed, especially when you have your eyes set on your dream set of wheels.

This may lead to car financing mistakes that could cost you in the long run.

But don’t worry, there are ways to avoid these mistakes.

In this article, we’ll discuss the most common mistakes people commit when financing a car purchase and share some tips on how you can avoid these and save money as you prepare to drive the car of your dreams.

But just before we begin, remember, this is just general information and is not meant as financial advice. It’s smart to talk to your finance specialist first for more personalised info.

What is car financing?

Let’s start by exploring how car financing works.

Car financing refers to the number of options that you can choose from to buy your dream car without paying outright in cash. Whether you’re buying a new car or a used one, you can finance your purchase by:

• applying for a car loan
• car finance lease
• Commercial Hire Purchase (CHP)
• novated lease

To learn more about these car financing options, read: What are the best ways to finance your car purchase?

What are common car financing mistakes and how can I avoid them?

With several finance options available out there, it’s important to find the right one for you, depending on your unique circumstances and goals for the car purchase. This way, you can avoid costly mistakes and drive away in your dream car with the best deal.

Here are 4 common mistakes that we often see when financing car purchases, as well as our tips on how you can avoid them:

1. Focusing on monthly payments

It’s a common mistake to concentrate on monthly repayments when discussing your financing options. Of course, it’s easier to think about how much you can afford to pay every month.

However, while it helps to know how much you’ll have to pay monthly, it’s better to have a big-picture look at your financing option. Beyond the monthly payments, check the following:

• the overall cost of the loan
• interest rates
• repayment terms

This way, you can avoid extended loan terms and higher interest expenses.

2. Not leveraging your credit score to negotiate

Finance interest rates can be determined by creditworthiness, so if you have a high credit score, you can negotiate for a lower interest rate.

The average car loan rate is approximately 9.49% p.a. If you can negotiate at least a per cent lower and get an 8.49% p.a. rate for a $20,000 car loan, you can save hundreds of dollars during a 48-month loan term.

If you know your credit score before getting a car and have an idea of the interest rates that match, you can steer the negotiation in your favour and drive away with the best deal.

3. Opting to finance the cost of add-ons and accessories

Next up: let’s talk about add-ons, accessories and warranties.

These costs are typically added on top of the actual cost of the vehicle and, more often than not, they appear as hidden charges that are not explicitly discussed. When you opt to finance these add-ons, you will be charged interest on them which will cost you more in the long run.

So, when you look at your loan contract, ask about every added fee and avoid unnecessary add-ons. If you really want add-ons such as an extended warranty or gap insurance, it may be better to pay for them outright so they don’t add up the overall cost of your loan.

4. Skipping research on financing options

Finally, there’s skipping research and taking shortcuts in car financing.

As in everything, preparing before making a big decision is crucial to car financing. While it’s easy to fall into the trap of settling for the first option you find, extensive research can save you a lot of money in the long run.

By comparing all available options from dealers, lenders and banks, you can get better interest rates and more favourable loan terms.

Now you know the vehicle financing mistakes to avoid!

These are some of the most common mistakes we have seen people commit in car financing, many of which have come at great costs.

However, this is general information only. The right finance option for you must take into account your unique circumstances and your goals for your car purchase – so always do your research.

While we can provide general car financing information, if you have any specific questions, it’s best to ask your trusted financial professional.

To navigate the complexities of buying a car, it helps to have guidance from car-buying experts who can find you the best deals and make the experience seamless as you choose your dream car.

If you find that you still have general questions about car financing, our team at Private Fleet will be happy to answer your concerns and help you find the best deals for your car purchase.

Simply reach out to us and we can have a chat about your options.

Find the right (and affordable) vehicle for you with Private Fleet.

Private Fleet empowers you to gain all the benefits of a fleet purchase, but as a private buyer.

Backed by decades of vehicle industry experience, fleet buying power and a network of car dealers across Australia, we are here to ensure that buying your next vehicle will be as straightforward as possible for you.

Shopping for a car is an enjoyable process – let us make it hassle-free, too.

Reach out to us today for a seamless and simple car-buying experience.

Digital Car Buying

As society has grown to depend on the vital role that online marketplaces play in our lives, they’ve also shifted the landscape in which such transactions take place.

In the car industry, motorists have increasingly voted with their feet – or perhaps more appropriately, voted with the click of a mouse. The high pressure tactics of new car salespeople have turned many buyers away from the car yards. Instead, many motorists now conduct at least their first line of research and enquiries online.

Whether it is P2P websites or online classifieds, car buyers now have a range of outlets available to them at the tip of their finger – all without needing to leave their very lounge room.

At the same time, consumers also have access to more information than ever before, meaning they are better informed than the shoppers of yesteryear. This has meant that motorists have equal footing when it comes to dealing with salespeople.

As a result, the dynamics of the engagement between a buyer and seller have required a shift. Salespeople are now more attuned to the stereotypes that hang over their head and have largely modified their behaviour accordingly.

While pushiness and shrewd tactics still exist, by and large things have evolved more towards an effort based approach to sales. That is, a salesperson needs to put in the effort required to quickly build trust and rapport with their prospective customer on the first visit, or said motorist will simply continue their search elsewhere. But has this necessary change come about too late?

The simple answer, is yes. The fact that technology has been the crucial point in redefining the market speaks to the extent of the shortcomings that were prevalent beforehand. On the part of the consumer, these issues while ‘patched over’, are not easily forgotten.

There are still trust issues there and many motorists will narrow their search before they meet a salesperson. They will use this as the basis of their ‘targeted’ shopping experience, intending to optimise the transaction.

What’s more, digital car buyers now have added flexibility in the form of customisation. Of course motorists always had the option to include extras or upgrades as part of their purchase, but the integrated and streamlined process now details a level of convenience where all options are clearly presented, including a visual perspective, as separate and detailed offerings.

All said and done, the rise of online marketplaces have not been without issue. In some instances, unlicensed second hand car dealers have been operating from the anonymity of their online username. And when a market opens to participants who have not been vetted, consumers may forgo some of the protective measures that have been mandated in the industry by regulatory authorities.

As always, buyers must be prepared to do the necessary research and consider the risks that accompany engaging with those they have not met, or cannot verify.

Brand New vs Used Car: factors you need to consider

Purchasing a car is one of the most significant life decisions and investments anyone will make.

While there are many cars available to choose from, there is so much more to consider when deciding than just the make and model of the vehicle – like choosing between a brand-new car or a second-hand vehicle.

If you’re undecided, we’ve laid out a few factors you need to consider to help you decide which of the two options works best for your needs.

4 things you need to consider when buying a new car or used car

Whether to get a new or used car is an age-old debate.

People will have varying opinions on which choice is the right one – but we believe it’s important to lay everything out so you can make the best choice for your unique situation.

Here are 4 factors to consider before you make your final car purchase decision:

1. Reliability

   New car
   There is no doubt that buying a new car comes with a solid dose of peace of mind. A new car will be (typically) more reliable and less likely to break down or need repairs. And if anything does go wrong, your new car warranty (usually three to five years) will have you covered.
   
   Most new cars come with a certain warranty based either on total kilometres or for at least three to five years. If you plan on selling the car within the warranty period, it usually passes onto the new owner which can be a handy bonus to help you sell your car faster. 
   
   Used car
   The word “used” in the term “used cars” says it all – buying one of these means you are investing in a car that has been driven by someone else for a period of time. Simply driving a car around will lower that vehicle’s overall condition, which means it will have a shorter lifespan by the time you purchase it. Not to mention, there is no way of knowing how well or poorly a car has been treated by the previous owners.
   
   

2. Price

   New car
   Buying a new car is more difficult on the wallet. If you’re using an auto loan to finance the purchase, then you’ll most likely borrow more than you would with a used car and end up paying more interest over time.
   
   However, it’s important to remember that since the car has newer parts, this is also beneficial to your long-term costs as you won’t have to go in for checks and part replacement as often as you would with a used alternative. Running costs are just as important to consider when buying a car – and if you buy new, these will generally be less.
   
   Used car
   Used cars of up to three years old can hold value extremely well. On the other hand, cars over five years old generally offer much cheaper purchase prices. It’s also important to note that certain brands are depreciation monsters, meaning you can pick a car up a relatively new car cheaply. There’s also greater bartering potential, especially with a private sale.
   
   

3. Waiting time

   New car
   If you’re buying a new car, you might have to wait weeks or even months until you’re sitting behind the driver’s seat.
   
   If it has to be ordered from the factory and delivered from overseas, shipping times can delay the arrival of your highly anticipated purchase. For some buyers, this simply isn’t an option, especially if their current vehicle has broken and they need to get back on the road quickly.
   
   Used car
   Almost any used car listed for sale will be available, right now. A swift morning phone call to the seller could have you in new wheels by the afternoon.
   
   Of course, this ignores the lengthy search efforts to find a perfect vehicle for you, but at least once you have decided you’re unlikely to wait 12 months for the seller to supply the vehicle.
   
   

4. Depreciation

   New car
   Car depreciation is defined by the drop in a car’s value over time – and it occurs as soon as you purchase a vehicle and begin driving it on the road. This value decrease is quite rapid, with most cars losing 15% or more off their car’s value as soon as it’s driven out of the dealership, and up to 30% by the end of the first year.
   
   Used car
   Cars lose value with each passing month and kilometre, but the steepest decline happens right away as soon as the keys change hands. However, with a used car, there’s no depreciation the second you roll off the lot.
   
   There’s also less mental depreciation, and no need to worry about the first car park ding or rock chip in the paint because chances are the car’s previous owner or owners took care of those for you! That said, there may be some mental anguish when it comes to less obvious damage about how well the car’s engine was treated.
   
   

The important thing to remember is that buying a car is usually an expensive journey regardless of which option you’ll choose. Ultimately, after everything is considered, it comes down to your personal preference and unique needs.

Ready to buy a new car or a used car?

Whichever you decide to choose, it helps to have guidance from car-buying experts who can find you the best deals and make the experience seamless as you choose your dream car.

If you find that you still have general questions about your car financing options, our team at Private Fleet will be happy to answer your concerns and help you find the best deals for your car purchase. Simply reach out to us and we can have a chat about your options, regarding buying a new car versus a used car.

Make the most out of your car purchase with Private Fleet.

Private Fleet empowers you to get all the fleet benefits as a private buyer.

Backed by decades of industry experience, fleet buying power and a network of car dealers across Australia, we are here to make sure that buying a new or used car will be as straightforward as possible for you.

Buying a new car is a memorable experience – let us make it hassle-free, too.

Reach out to us today for a seamless and easy car-buying experience.

Ready, Set, Charge!

If you are one of the many who has opted for an EV for whatever reason, then the time will come when you have to charge it up – just like you have to charge up your phone, e-reader or laptop. However, charging an EV is not quite the same as filling up a petrol or diesel tank, and if you’ve never done it before, there are a few things that you’ll have to get used to, especially regarding the different charging speeds.

Deep breath required here. There will be maths.

With all types of charging, the exact amount of time you’ll need to charge the battery will depend on the voltage of the outlet and the battery capacity. The formula for working it out is:

E = P × t

Makes you feel a bit like Einstein, saying that. E is energy, P is power and t is time.  Rearrange this and you get t = E/P or, in plain language:

Your EV’s battery capacity (in kWh) ÷ power output of the charger (in kW) = hours of charging time

This equation, however, mainly applies to charging to 80% rather than 100% (and this is the charge time figure that you’ll see in specs and stats from the manufacturers of EVs). This is because charging isn’t a linear process and it slows down as the battery gets closer to full charge. It’s a mechanism that helps prevent overheating. If you want to charge to 100%, bear in mind that doing so will take a bit longer.

The thing that most people are concerned about is the charging speed. In fact, the charging times are one factor that can put people off purchasing an EV, especially an all-electric BEV or a PHEV. Here in Australia, we have reasonably sensible names for the different charging speeds, unlike in other countries, where you have to ask a few questions to be sure what you’re talking about during a discussion of fast charging – you’ll hear some people talk about fast charging as something different from rapid charging (I feel sorry for those who don’t speak English as their first language because – well, you try explaining the difference between fast and rapid!). Here, we keep things straightforward, calling the two most common charging speeds Level 1 and Level 2, with only the fastest type being called “DC fast charging”.   

Level 1 charging is simplest type of top-up charging that you can do at home or anywhere else you can access a standard common or garden power socket.  It seems very simple but the trouble is that this type of charging is very, very slow. Recharging a completely drained battery will take at least a whole day, as in a 24-hour day.  It could even take 48 hours, which is fine if you’ve got the whole weekend to recharge your car’s batteries as well as your own and don’t have to go anywhere.  On the other hand, if you find yourself at a relative’s place in the country and not enough charge to get you home, you can just plug in and recharge enough to get you home again, or at least to the nearest public charging station (it would be nice if you compensate your relative for the power you’ve used, same as if they let you have a jerrycan of petrol if you’d run out). You may hear this referred to as trickle charging.

Level 2 charging is the sort of charging you do with one of those wall boxes in your home, and Level 2 chargers are what you’ll find in typical public chargers of the kind you’ll see at the supermarket, mall or gym and, if you’re really lucky, at work. Typically, you get around 7.2 km of mileage for every 10 minutes of charging with a 7.2 kW unit, or 22 km of mileage for every 10 minutes with 22 kW charging. (Is anybody else getting flashbacks to the sorts of word problems we had to solve at school?)

However, remember that these mileage figures are approximate and are under ideal conditions. If you have a heavy load, if you have to go into a headwind, or if you want to run the lights or heaters or play music, you’ll reduce the range.

Commercial outlets will often provide chargers not just for their customers’ convenience (although this is certainly part of their motivation) but also as a marketing ploy. If you need to ensure that you’ve got enough charge in your battery to get you home again after work and shopping, then you may need a couple of hours to charge the battery to the right level. However, it may take you only one hour to do your workout at the gym or to pick up your groceries, leaving you with time to kill. Chances are that you’ll spend time in the gym cafeteria or that you’ll spend a bit longer in the supermarket browsing the shelves to fill in the time and will thus spend more money, which is what the commercial outlets are hoping for.  Just be aware of this little ploy and budget for it, develop some iron self-discipline and a healthy bit of patience, or take a book. Just don’t make the mistake of sitting in your car doing things on your phone or laptop with your device plugged into the charger in the car!

Speaking of budgets, a home wallbox will have to be bought separately when you buy a new EV. It’s a good idea to buy one, as otherwise you’ll be relying on super-slow trickle charging or public charging stations to top up the battery. It will also need to be installed by a professional electrician, like your oven or hot water cylinder and for the same reasons. You’ll also have to factor the cost of labour in as well. This is something to keep in mind.

DC fast charging (aka rapid and ultra-rapid charging) uses DC electricity, whereas Levels 1 and 2 use AC electricity. The best known DC chargers are the Tesla superchargers even though, ironically, the original Nikola Tesla promoted and popularized the use of AC electricity. How fast this type of charging will be will depend on the battery, but charging can be done in less than an hour, depending on the kW rating and the type of car. Some EVs charge faster than others. It has to be remembered that not all EVs are compatible with DC fast charging; this is often the case with PHEVs. This is something to check and think about when you buy an EV.

It’s also important to understand the different types of connectors or plugs, but that’s another story for another time.