Car Finance

The problem is the very large sum of money between you and the car and you think it's an impossible target.Think again. There are dozens of financiers on call to make that car come home with you - but you need to know what's available, what's required and more importantly, what it's going to cost.Gauging the size of the car loan industry can be reflected by lenders such as St George and Esanda that each write around $220 million of car loans a month. So there's money available. These are the steps to get your hands on some.CREDIT HISTORYThe first step is your ability to repay. A car loan specialist of Yes Loans says your credit history is critical to successfully buying any car on finance.If you have a bad credit history - a cupboard full of irregular payments, none payments and even a repossession - you have a rocky time ahead getting finance and even then, you'll go to the top of the interest rate scale.But, they say, it's not the end of the world."If you pay on time for 12 months you can re-establish your credit rating and get lower interest rates," he says. "History is that - history. You can turn your credit rating around and that will make life easier and cheaper for the future."CAR FINANCEFinancing your car - as distinct from paying with cash - is generally the quickest, easiest and most expensive way to get wheels. Recognise that and you're on your way.National car dealership chain AHG does big business in financing its products. One of the biggest attractions is that the money business is done virtually on the spot, in the dealership office. That makes it quick and easy. It is made easier by the fact that the size of AHG allows it to offer interest rates in line with the banks - because that's generally where they get the money.AHG writes about 1700 new and used car loans a month. A spokesperson for the group says buyers are increasingly using dealerships as a source of finance."Overall, there's 85 to 90 per cent approval rate for all loans," he says. "Getting finance from a dealership is just as competitive as from other lenders, plus is a significantly simpler arrangement. It means that buyers don't have to search and source funds elsewhere."LOANS TYPES VARYThe AHG spokesperson says fixed rate loan agreements are the most common finance arranged by AHG, with about 70 per cent for individuals and 30 per cent for businesses.They say the recent National Consumer Credit Protection Regulations - which licences financiers and monitors car dealers - had led to banks tightening their criteria on personal loans and that placed more business with the specialist car loan finance companies."There's more rigour in finance because of the regulations," they say. "But it has led to more finance being written by dealerships."A spokesperson from Yes Loans says the type of finance product and the amounts being lent had changed dramatically since the GFC."I would say that our clients are much more price sensitive than they were two or three years ago," Yes Loans say. "The size of the loans are also down significantly. The majority of our clients are price sensitive. Most are smaller loans and the customers are buying small, inexpensive cars like Hyundai Getz."The spokesperson says most are chattel mortgages and consumer credit loans - used to be hire purchase - which are secured on the car."If the customer has no credit rating, or has a poor rating and has a loan default, we can organise for an existing loan to be paid out," they say"A loan can be tailored for borrowers on low income, or low disposable incomes. For example, the loan period can be extended so monthly repayments are smaller. That also improves the chances for the loan being approved."A high credit rating can mean lower interest rates and therefore lower repayments. According to data from loan comparison groups such as Cannex, a low-risk, high credit rated borrower could, for example, have an interest rate of 10 per cent for a secured loan.But if the loan is unsecured - that is, no collateral is required on the car - then the same person could pay 14 per cent. Commercial rates are lower. A low risk loan could be charged at 7.8 per cent as a base rate and yet as the risk increases, the interest rate may grow to 16 per cent.REPAYMENT CAPACITYFinanciers use a point-score system to assist in determining repayment capacity. This can be used in conjunction with the Henderson Poverty Index that is a sliding scale taking into account marital status, income, disposable income, length of employment, number of children and so on. Buyers should be aware that used car loan rates are more expensive than new car rates."That's based on the car's age," Yes Loans spokesperson says. "There are other variables as well, mostly affecting insurance, such as the driver's age and driving record, type of car and so on."Generally, a used car buyer can expect to pay 2-4 per cent more in interest rates than a new-car buyer.CASH BUYERSThen, for a lucky few prospective car buyers, there's cash. The Yes Loans spokesperson says there's a "true" 10 per cent of buyers who pay using cash."That is, not people who think cash is getting an overdraft or borrowing against equity in their homes," they say. "Cash buyers have usually saved the money, received a payout from work, for example, or have access to other sources of lump sums."But don't think cash is king in a dealership. Mr Kininmont says the benefit of using cash is all to do with the negotiations."Each individual transaction is based on its merits," they say. "There is no real advantage or disadvantage in using cash for the purchase of a motor vehicle."TIPS FROM 'Your Money'YOUR interest rate is the key number to watch when it comes to car loans. Paying too much interest is like throwing money out the window, and we do plenty of that with new cars that depreciate as soon as we drive away with them. Current car loan interest rates range from just below 9 per cent to about 13 per cent – or more if it’s unsecured. On a $20,000 loan over five years that’s an interest cost to you of $5000 or $8000+, a big difference in these days of watching every dollar we spend.Take the time to get two or three quotes from different lenders, and also visit consumer comparison websites such as infochoice.com.au and canstar.com.au to see the wide range of lenders and options available. Car loan interest rates are higher than your home loan rate (about 7.8 per cent among the big banks) and it makes sense the pay down your higher-interest loans first. You can save money by redirecting windfalls such as tax refunds into your car loan if the loan structure allows it, while some people finance their cars using the equity in their home loan.Anthony Keane'Your Money' Editor

1. Standard loan (bank, credit union, etc) The financier lends the customer the money to buy a new or used vehicle. It is the simplest of loans but you need to be financially sound and prepared for some extra expenses. It can be secured or unsecured (higher interest rate). The vehicle is the security for the loan so

So, you've found the car you want and you've made the decision to finance the purchase, but with hundreds of options in the car loan business, you need to keep your wits about you. Here are some important points to keep in mind when looking at finance options for your new car.Rates, fees, fees, fees and payments ...1. There are rates and there are comparitive rates. You usually pay the comparitive rate, not the rate that is advertised in the newspaper, which can be up to 5 per cent higher.2. Establishment fees are a one-hit cost to do just that - establish your loan. Not all financiers charge this. It can be $300.3. Service fees. These are ongoing, usually monthly, charges for the pleasure of your business. They can be comon with some financiers but others, including most credit unions, don't have them. Service fees can be 5 per cent of the monthly repayment which can add up to a significant amount over a four year loan term.4. Exit fees. Pay off the loan early and you're smiling, and so may your financier. Paying off early can incur a penalty of up to $500. This varies between finance providers. Some charge no exit fees.5. Try and pay off fortnightly. This reduces how the interest charge is accrued and therefore you pay less interest. That can also reduce the term of the loan.

Sure, if the car you drive is legally yours, selling is fairly simple - you simply list it on Autotrader.com.au and wait to be flooded with buyers, perhaps putting on your slickest suit so you can play at being a car dealer for the weekend.If you owe any money on your car, or it's the subject of some kind of financing arrangement, however, things can get complicated. Selling a financed car involves a juggling act aimed at keeping three parties happy: you, your lender and your buyer.But if you keep a clear head, prepare ahead of time and remain honest with both your customers and your lender, you should be able to sell your financed car without too many horrific headaches.It all comes down to how car loans work. A standard car loan uses the car as a safeguard, in case you can't make repayments. This is known as a secured loan, where the vehicle itself is the security. The idea is that if you can't meet the loan repayments, the lender can repossess the car and sell it to recoup costs.The problem with selling a financed car lies in how secured car loans are organised. The loan is applied to the car, not the buyer. It's the buyer's responsibility to repay the debt but, because the car forms the basis of the secured loan, the outstanding balance will always apply against the car itself. This is called an encumbrance, which sounds like some kind of exotic cucumber, but isn't.Your car may not have money owing against it, even if you borrowed money to fund its purchase in the first place, so you might not be encumbered.For instance, if you have a mortgage and have redrawn against it, the house is the security, not the car. If you bought with a credit card or drew from an unsecured personal loan, the lender can't use your possessions as security, so your vehicle is unencumbered. This means that the loan will apply to you, not your beloved but soon to be departed vehicle.Personal loans and credit cards have higher interest rates than secured loans for this exact reason. Without a large-ticket item to use as security, there's a larger risk the bank won't get its money repaid in full. The larger the bank's perceived risk, the higher the interest rate.There are a few options to sell, but you are obliged to prepare beforehand, as loan-rating service CANSTAR's Justine Davies explains."If you have decided to sell a financed car, you'll need to talk to your bank about how you are going to pay that car loan off," she says."If you're going to pay your car loan out early – which you'll have to do if you are selling your car – then be aware that you'll have to pay some fees."The costs will differ between lenders but there may be an administration fee, a break fee and a cost-recovery fee, so check what these costs will be before you decide to sell."In a lot of cases, you'll need the sale price to go directly to your lender to pay the outstanding balance on your loan."If you don't have the cash to pay it off, you can organise to complete the sale transaction at the offices of your financial institution," Davies says."That way the money from the sale can go straight from the buyer to the bank."In cases where the loan amount is more than the car's value, you can repay the gap between the sale value and the debt yourself. The bank will then lift the encumbrance from the car, leaving the new buyer with a clear title.If you have other lending options available to you, it can be a good idea to remove the car's encumbrance all together before trying to sell. You can redraw against your mortgage, take out an unsecured loan or get a cash advance from your credit account.However, each of these options has a drawback. Unsecured loans and cash advances carry higher interest rates than secured loans, which can leave you handing even more back to the bank. Mortgages can take decades to pay off, meaning that a small redraw today can cost significantly over the life of the mortgage, although home-loan rates are historically low at present.Always be upfront about any money outstanding on the carIf you're selling your car with a mind to upgrading, rather than selling outright, dealers offer a mostly hassle-free way to upgrade. Because dealerships make their money on finance as well as car margins, they'll be only too happy to organise finance to pay out your car's outstanding balance and cover the cost of upgrading.A similar deal applies if you're downsizing to a less expensive car, but finance can be tricky in this regard. If your finance amount is, say, $40,000, a $25,000 car won't be enough security to obtain a secured loan. In this case, you'll need to look to other avenues for finance.If you're trying to sell a car that is encumbered, it shouldn't put buyers off, as long as you're upfront about the situation. A good car, with low kilometres, is still a bargain everybody wants.Honesty is the best approach, as Davies explains. "Always be upfront about any money outstanding on the car," she says."The buyer will most likely do a public search on the car via the Personal Property Securities Register and find out anyway, so it's far better of you tell them first and let them know how you'll be paying that loan off."List your car here on Autotrader.com.au.

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I originally bought my 2013 Subaru Impreza in the ACT. I have moved to NSW four years later and have been to the RMS to change my registration over to NSW. They questioned the zero amount paid as stamp duty on the purchase. In ACT, as my car is listed as A class so the stamp duty is zero and after verified it with the ACT the RMS agreed and issued my new plates. Three days later they insist on collecting stamp duty after all and want three percent of the market value, i.e. $420, as they don't accept that I have met the obligations to pay but as it was zero they say I haven't paid any. What do I need to do to satisfy their insistence that I still have a liability for stamp duty. All I have done is move from ACT to NSW.

I purchased my 2015 Holden Cruze on lease for a period of five years, but now I want to get rid of this lease agreement. Is it feasible to swap the lease with someone else, or is there any other alternative to sell my car.

 

I will be returning to WA after being out the country for a number of years and I'd like to know how long it would take to get finance and register a car. The reason I ask is that I will be hiring a car at the airport and need to know how long I need to make the hire.