The silver lining of a slow new car market

The silver lining of a slow new car market

June 27, 2011

New cars have lost some of their sparkle this year, with sales at 21-month lows. Not only has flailing consumer confidence hit the car market hard, but low stock levels from earthquake and tsunami-ravished Japanese manufacturers has put the brakes on local sales.

But there are still some good deals to be found in car yards around the country, with end of financial year sales particularly appealing in the European imports sector. That, combined with steady interest rates and a flurry of low-rate car loans on the market means now may be a good time to buy your dream car.

The stats
Overall, just shy of 76,800 new vehicles were sold in May 2011, which was 7.6 percent less than in April 2011.

All vehicle types felt the pinch with sales of new passenger vehicles, sports utility and other vehicles all less in May than April, down 7.5 percent, 10.6 percent and 4.5 percent respectively, according to Australian Bureau of Statistic’s seasonally adjusted data.

There was similar sentiment around the country with residents of all eight states and territories avoiding new car yards in higher numbers during May. In seasonally adjusted terms, Victoria recorded the largest percentage decrease of 12.3 percent followed by the ACT with sales down 8.5 percent for the month and Queensland, where new car sales dropped 7.3 percent in May.

NSW residents again bought the most new cars of all their state counterparts, with just over 24,000 new vehicles sold in the state during the month.

Save thousands
With the new car market in the doldrums and many good deals to be found, it may be tempting to go with the first car loan you come across when you’re caught up in the excitement of buying a new car. But you’ll almost always benefit from taking the time to shop around for the best deal available.

At the moment, the average interest rate on five year car loans of $20,000 available through RateCity is fairly low at just 10 percent. But there are a number of options with rates even less than this.

For instance, IMB‘s New Car Loan has a rate of 8.9 percent, CUA’s loan for vehicles less than two years old and worth up to $30,000 has a rate of 8.99 percent, and RACV‘s Secured Car Loan has a fixed rate of 9.25 percent, to name a few.

It takes less than a few minutes to compare car loans online and the savings can be significant. By switching from a typical car loan of $20,000 with a rate of 10 percent to one with a rate of just 8.9 percent, you could reduce your monthly repayment by at least $10 or $600 after five years.

If you’re currently paying a higher rate of say, 13.9 percent, the savings could be more dramatic if you switch to a rate of 8.9 percent. That’s a saving of $50 per month or $3000 after five years. Wouldn’t that be better in your pocket?

 

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Learn more about car loans

How much is your car worth?

If you already own a car, you could potentially bring down the cost by selling your car in the process. Before that happens, though, you’ll need to find out how much your car is worth.

One of the first places to find this value is to research the value of your current car, giving you an idea of roughly how much it’s worth in its peak condition.

There are plenty of websites that offer a free online valuation, allowing you to enter your car’s make, model, year, badge and description, with results listing a price guide based on both selling your car privately and through a dealership.

Of course, dealerships will try to profit on your trade-in by buying it for less than they can sell it, making it highly unlikely that you’ll get the same price selling a car to a dealer as you would selling a car privately.

However, private car sales can be costly and can take months to sell, making car trading more convenient with a guaranteed return, even if you may not be able to realise the total value of your car’s worth.

Remember that everything is negotiable. If the dealership is offering you less for your trade than you wanted, try to negotiate elsewhere to gain that money back. Start by negotiating on the price of the trade and then ask them if they can give you a further discount on your new car.

Where can I get a student car loan?

Student car loans are not a necessarily a product in and of themselves, but what you may be looking for is a guarantor car loan.

A guarantor car loan has a third-party act as a form of guarantee for your loan application, telling the bank or lender that if you default on your loan, someone will pay the loan repayments.

Going guarantor on a car loan is no new thing, and before internet-based credit scores, guarantor car loan applicants would apply for loans with a guarantor or property owner who could vouch for the person borrowing the loan.

To get a guarantor car loan, you’ll need someone willing to act as a guarantor for your car loan.

What is a secured car loan?

A secured car loan is a loan that is connected to a form of security, or collateral. Generally, the security for a car loan is the car itself. If you fail to repay the loan, the lender might seize your car, sell it and then use the proceeds to recover their debt.

How much can I get towards a new car as a single parent?

It really depends on your financial circumstances as to how much a lender will grant you towards a new car as a single parent. With most lenders, the smaller the loan you apply for, the higher your chances are of approval, so getting a cheaper car or adding some savings of your own, may be a valid option if you are struggling for approval on a car loan.

What are the pros and cons of guarantor car loans?

Like all things, there are positives and negatives to guarantor car loans, though one may outweigh the other depending on your needs.

Guarantor car loan pros may include that you’re more likely to be approved for a long if you have no credit or a history with bad credit, that you’re more likely to secure a car loan with a lower interest rate, and that because your guarantor car loan is based on a relationship, you will be more inclined to meet your repayment schedule.

However, there are negatives, as well. Guarantor car loan cons may include leaving a detrimental mark on a personal relationship with added strain if you don’t meet your repayments, and you may take out a loan that you can’t actually afford.

Weighing these pros and cons will give you a greater understanding of whether a guarantor loan is ideal for your circumstances.

What is an early termination fee?

Some lenders will make you pay a penalty, or early termination fee, if you pay off your loan ahead of schedule. This is to compensate them for the interest payments they don’t get to collect.

What is a green slip?

A green slip, also known as compulsory third-party insurance or CTP insurance, is compulsory if you want to register a vehicle in Australia. If you’re responsible for a car accident, your green slip will be used to pay any compensation due to anyone who might be injured or killed. However, a green slip doesn’t cover you for vehicle damage or theft.

What is a novated lease?

A novated lease is a car lease that is ‘novated’, or transferred from one party to another. Novated leases are often used when companies provide a car as part of a salary package. The employer signs for the lease and makes the lease payments, but the employee assumes the responsibility of looking after the car. While most car leases involve two parties, novated leases involve three – employer, employee and financier.

What is vehicle finance?

Vehicle finance, also known as a car loan, is money that a consumer borrows with the express purpose of buying a vehicle, such as a car, motorbike, van, truck or campervan. Vehicle finance can be used for both new and used vehicles.

What is a finance broker?

Finance brokers help borrowers organise car loans with lenders – that is, they act as middlemen between borrowers and lenders. While lenders will only recommend their own products, finance brokers recommend products from a range of lenders. Finance brokers need to be accredited with a lender to do business with that lender; a typical broker will be accredited with between 10 and 30 lenders. Finance brokers generally don’t charge consumers; instead, they receive commission payments from lenders.

How much can I get towards a new car as a single parent?

It really depends on your financial circumstances as to how much a lender will grant you towards a new car as a single parent. With most lenders, the smaller the loan you apply for, the higher your chances are of approval, so getting a cheaper car or adding some savings of your own, may be a valid option if you are struggling for approval on a car loan.

What is CTP insurance?

CTP insurance, also known as compulsory third-party insurance or a green slip, is compulsory if you want to register a vehicle in Australia. If you’re responsible for a car accident, your CTP insurance will be used to pay any compensation due to anyone who might be injured or killed. However, CTP insurance doesn’t cover you for vehicle damage or theft.

What is an establishment fee?

Some lenders will charge you an establishment fee, or one-off upfront fee, to cover the cost of setting up your car loan.

Where can I find car loans for single mothers?

Single mothers can sometimes find that due to their circumstances the bigger banks can be less inclined to lend to them, but there are smaller companies and specialist lenders who can be willing to provide loans to people in a range of circumstances.

Single mothers could benefit from getting in touch with a car finance broker, as a broker is likely to have knowledge and access to options that are suited to their needs.

Advantages to using a broker:

  • Finance brokers often don’t charge for their services as they work on a commission basis from lenders.
  • Brokers will have industry knowledge and contacts within lending companies and is therefore more likely to be able to find the best deal for your circumstances.
  • Brokers are qualified professionals who are licensed under the National Consumer Credit Protection Act so have an obligation to follow responsible lending practices and to work in your best interests.

Find car finance through a broker.