CAR LOAN RAGE
What it is and how to avoid it
The number of fees and penalties attached to car loans may well give rise to a new phenomena 'car loan rage', a syndrome where normally placid people see red when reading their car loan statements. In the most severe of cases, steam emanating from the ears is clearly visible.
Right from the beginning, your car loan could cost you a hefty application or establishment fee of up to $200 so it pays to be aware of fees and penalties and shop around to compare car loans before committing.
As well as application or establishment fees, there are other fee speed bumps to slow you down. These include documentation, on-going and encumbrance fees. However, when you turn into Penalty Street, your loan is speeding towards a dead end.
If you miss a payment, even by one day, you could be slugged up to $50 on a new car loan or $35 on a used car loan. Do that a couple of times a year and, all of a sudden, your loan repayments are up there with the cost of petrol.
Traditionally the domain of credit unions and building societies, car loans and personal loans are very competitive but many fees and penalties can be avoided altogether.
Some car loans, over 17% in fact, do not have a fee for application or establishment and the majority do not charge a documentation fee.
One fee to watch out for is the encumbrance fee or REVs as it is known in the trade. This fee is charged to cover the cost of ascertaining if there is any previous claim to the car's ownership title that would affect the lender. RateCity has noted that an encumbrance fee can be as high as $65. There is no justification for this amount as the encumbrance fee is mandatory and the amount is set by state governments. It is typically around $15. If encumbrance fees are not identified separately, they are most likely to be included in the application fee.
One last warning from RateCity concerns the early repayment penalty of up to $200. If you intend paying out your loan earlier than the contracted time, make sure you don't sign up to a loan with an early repayment penalty. The unexpected sting in the tail could bring on an attack of car loan rage.
How do I compare car loans?
RateCity is the best website to shop around on for car loans, personal loans and most other financial products. At RateCity, you can use expert comparative data from CANNEX, Australia's leading financial research and ratings firm. CANNEX has analysed and evaluated hundreds of loans to award five stars to only the very best. The CANNEX star ratings go much further than just looking at interest rates. They also take into account important loan features so you can be confident you are getting the best product.
Use our easy search tools to compare car loans at RateCity.
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