New car sales activity revs up in June as bargain hunters snap up EOFY deals

New car sales activity revs up in June as bargain hunters snap up EOFY deals

Car shoppers were out and about in June, with more than 110,000 new vehicles sold in the month, according to the Federal Chamber of Automotive Industries (FCAI) data.

June recorded the highest number of car sales this year, thanks largely to end-of-financial-year bargains and the easing of COVID-19 restrictions.

“Some states have seen the easing of COVID-19 restrictions, and this has increased floor traffic through dealerships,” FCAI chief executive Tony Weber said.

“In addition, June is traditionally a very strong month for new vehicle sales. The end-of-financial-year campaigns are well-known, so it’s an excellent time for businesses and consumers to replace their vehicles.”

Mr Weber added that the federal government’s extension of the instant asset write-off scheme until the end of 2020, as well as marketing efforts from vehicle brands and dealerships.

Many brands and dealerships are enticing buyers with retail package offers to tackle the COVID-19 sales slump.

“With all of this activity favouring consumers, there’s no doubt that there has never been a better time to negotiate the purchase of a new vehicle,” Mr Weber said.

Competition for car loan borrowers is also sharp, with new vehicle lending dropping by almost 38 per cent in April, according to the Australian Bureau of Statistics.

Meanwhile, the lowest car loan rate on the RateCity database is 2.99 per cent (3.60 per cent comparison rate) from the Queensland Country Bank for new cars not older than five years. The average car loan rate is 8.17 per cent.

Slight recovery but growth still in negative territory

June was the strongest month since the pandemic began in Australia when looking at changes on a 12-month basis, despite negative growth of 6.4 per cent from June 2019.

Mr Weber believed the subtle bounce-back in sales was due to government stimulus measures.

“Stimulus packages from the federal government, such as JobKeeper and JobSeeker, have helped to restore some consumer confidence and supported the small bounce back during June,” Mr Weber said.

“However, there’s no doubt that the new vehicle industry in Australia is still under high pressure.  We’re not out of the woods yet.”

But in comparison, the plunges were more apparent in previous months, as sales in May plunged by 35 per cent in the 12 months prior, while April and March transactions fell by 48 per cent and 35 per cent respectively.

Negative sales growth isn’t a new problem for the industry, with June being the 27th consecutive month of falling sales for the Australian new vehicle market.

And overall new vehicle sales in 2019, totalling more than one million, tumbled by 7.8 per cent from 2018 results. The yearly numbers were the lowest FCAI has recorded since 2011.

  January 2020 February 2020 March 2020 April 2020 May 2020 June 2020 Total (year-to-date)
Number of car sales 71,731 79,940 81,690 38,926 59,894 110,234 442,415

Source: Federal Chamber of Automotive Industries.

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Learn more about car loans

What is depreciation?

Depreciation is the reduction in the value of your car. Almost every car loses value each year, although at different rates. As a guide, cars depreciate on average by 14 per cent per year in the first three years and then eight per cent per year after that.

What is a car loan?

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

What is equity?

The equity is the share of the car that you own. For example, if you take out a $15,000 loan to buy a $20,000 car, you have $5,000 of equity in the vehicle, or 25 per cent. (The lender has the other 75 per cent.) Equity changes over time as you pay off your loan and your car depreciates in value. For example, two years later you might now owe $10,000 on your car, which might now be worth $15,000. In that case, you would still have $5,000 of equity in the vehicle, but your share would be 33 per cent.

What is resale value?

The resale value is the price you could realistically charge if you were to sell your car. Almost every car loses value each year, although at different rates. As a guide, cars depreciate on average by 14 per cent per year in the first three years and then eight per cent per year after that.

What is a variable-rate loan?

A variable-rate loan is one where the lender can change the interest rate whenever it wants. For example, if you sign up for a variable-rate loan at 8.75 per cent, the lender might change the interest rate to 8.90 per cent the month after and then 8.65 per cent the month after that. By contrast, if you take out a five-year fixed-rate loan at 8.75 per cent, the lender is obliged to leave your interest rate at 8.75 per cent for at least five years.

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 an LVR?

The LVR, or loan-to-value ratio, is a percentage that expresses the amount of money owed on the car compared to the value of the car. For example, if you take out a $15,000 loan to buy a $20,000 car, you have an LVR of 75 per cent. LVRs change over time as you pay off your loan and your car depreciates in value. For example, two years later you might now owe $10,000 on your car, which might now be worth $15,000. In that case, although there would still be a $5,000 difference between the size of the outstanding loan and the value of the car, the LVR would now be 67 per cent.

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 an interest rate?

The interest rate is the price you have to pay for borrowing money. The interest rate is expressed as an annual percentage of however much of the loan remains to be paid. For example, if you took out a $10,000 car loan with an interest rate of 8.75 per cent, you would be charged 8.75 per cent of $10,000, or $875 of interest per year. But if you then reduced the outstanding loan to $9,000, your annual interest bill would be 8.75 per cent of $9,000, or $787.50.

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.

Where can I find lenders who offer no credit check car loans?

There are companies that claim to offer no credit check car loans. However, you may find that companies that offer no credit check car loans have high fees and high interest rates.

You might be better off finding a specialist lender who will look at your credit history and income, who will decide whether or not you are able to responsibility pay back the loan. Alternatively, you could contact a car finance broker.

How to find a great car loan

Historically, finding a great car loan would require excess research ranging from visiting an excess of websites or making phone calls, but technology has moved on. Using RateCity, Australia’s leading financial comparison service, you can check out great deals from a range of lenders on the one site.

To start, select the amount you want to borrow and the length of the loan, narrowing your search to show just fixed or variable interest rate results.

Once you’ve indicated your search criteria, you’ll see an immediate list of lenders, ranked by interest rate or application fees. You’ll also be able to view the monthly repayment amount for each result, helping you to know what you can afford.

Up to six products can be compared side-by-side, complete with more information about each car loan, giving you more information about your options.

When comparing your car loan options, it’s ideal to keep in mind some points find a great car loan for your needs. Consider the following:

  • Choosing a low interest car loan can reduce costs
  • Selecting an option with low fees and charges is ideal, because these can really add up
  • Be aware of penalties, such as early exit penalties if you pay off the loan sooner than expected
  • Consider the features that best suit your situation

There are many ways to ensure that you get a great car loan. Ultimately, you’ll end up with the best deal by doing your research and selecting the most suitable product for you.

Can I get car finance on a pension?

 

Yes, as long as you meet basic criteria set out by lenders you are eligible for car finance. Your interest rate will be determined based on your financial history which can be found in your credit report, your income and any property you may own.

Comparing car loans for pensioners before you settle on one is important though, if you want to secure the best possible loan for your circumstances.

Can I buy a car as a student?

Buying a car is a huge financial decision, and shy of marriage and purchasing a house (or perhaps around the world travels), it may be the biggest financial decision you make. But if you’re looking at your empty pockets, don’t despair! Your dream of owning your own car could become a reality, if you look for and compare the right car loans for your circumstances.