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

How to get a chattel mortgage?

Both businesses and individuals may use a chattel mortgage, provided that the car is being used predominantly for business purposes. 

To apply for a chattel mortgage, you need to first consider your options and choose a suitable lender that meets your requirements. Once you have selected a lender, you can apply for the loan online by filling out a form. If the lender doesn’t offer an online application process, you can either call them or visit their nearest branch. 

After you’ve applied, the lender will ask you to supply documents that confirm your identification, income, job profile, etc. If everything is in order, most lenders will arrange the loan’s settlement, so all you need to do is pick up your car!

Can you get a chattel mortgage with bad credit?

Getting approval for a chattel mortgage with bad credit may be possible, given ‘chattel’ (usually a piece of equipment or car) is put up as security for the loan. That means if you fail to repay the loan, the creditor can recover the loaned amount by repossessing and selling the car or piece of equipment. This differs from unsecured car loans, where the asset is not tied to the loan and cannot be taken if you don’t meet the repayments. 

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 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 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 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.

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.

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 the luxury car tax?

The federal government imposes a luxury car tax of 33 per cent on the value of a car above a threshold. As of the 2017-18 financial year, that threshold was $75,526 for fuel-efficient vehicles and $65,094 for other vehicles. So a fuel-efficient car worth $80,000 would be taxed only on the difference between the threshold and the value of the car ($4,474), rather than taxed on the entire $80,000. Similarly, an ordinary car worth $70,000 would be taxed on the $4,906 above the threshold, rather than the entire $70,000. The luxury car tax is paid by dealers that sell or import luxury cars, and also by individuals who import luxury cars.

What is a loan-to-value ratio?

The loan-to-value ratio, or LVR, 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 a loan-to-value ratio of 75 per cent. Loan-to-value ratios 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 loan-to-value ratio would now be 67 per cent.