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Lenders getting increasingly personal with their car loans

Lenders getting increasingly personal with their car loans

Car loans are changing. In the old days, banks had a one-size-fits-all interest rate. These days though, a growing number of lenders are offering personalised rates.

The idea is that when you apply for a car loan, the lender assesses your individual circumstances, based on factors such as your:

  • Income
  • Job type
  • Job tenure
  • Savings
  • Spending habits
  • Assets
  • Debts
  • Proposed car purchase

The lender then uses that information to assess your creditworthiness – that is, how likely you would be to repay a car loan – and then offer you a personalised interest rate. As a general rule:

  • Lower-risk borrowers are offered lower interest rates
  • Higher-risk borrowers are offered higher interest rates

Different quotes for different folks

Personalised car loans are particularly popular with online lenders and non-bank lenders.

A good example is Stratton Finance, which has car loans starting from 4.69 per cent (comparison rate 5.64 per cent)* for ‘prime’ borrowers. Borrowers can visit the Stratton Finance website to get a quote estimate. Here’s how the process works:

  • You provide some biographical information and state your borrowing requirements 
  • Stratton Finance provides an indicative interest rate and your estimated repayments

Remember, these car loans are personalised, so you might receive a different quote to your friend or your partner.

If you then want to take action, Stratton, like other online lenders, allows you to apply for a car loan without leaving your home.

* Data accurate as of 14 November 2019

What type of vehicle are you planning to buy with your car loan?

According to the Federal Chamber of Automotive Industries, the top-selling vehicles in October were:

  • Toyota Hilux
  • Ford Ranger
  • Hyundai i30
  • Toyota RAV4
  • Toyota Corolla

Meanwhile, the brands with the highest market share in October were:

  • Toyota = 20.6%
  • Hyundai = 9.0%
  • Mazda = 7.7%
  • Kia = 6.1%
  • Ford = 5.9%

Comparing car loans could save you big dollars

Of course, Stratton is just one option. It’s important to shop around and compare car loans so you can find the best car loan for your situation.

Some Australians do the opposite of shopping around: they stick with their current bank on the assumption that they will be rewarded for their loyalty with a low interest rate. However, banks rarely provide loyalty bonuses – and, even if they do, a small rate reduction may be far less than the saving you could make by taking your business to a different institution.

For example, the table below shows the potential savings available to customers of the big four banks who go to Stratton Finance for their car loan.

Whatever make and model you end up buying, your car loan is increasingly likely to include a personalised interest rate.

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This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.

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