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Your next car loan may be for a hybrid

Your next car loan may be for a hybrid

With petrol prices affecting the cost of living, more than half of Australians are considering hybrid or electric cars as alternatives to traditional petrol-fuelled vehicles, according to a new report from Roy Morgan.

The Automotive Currency Report found that 56.1% of Australian drivers would seriously consider a hybrid or fully electric vehicle – up from 52.4% last year, and well ahead of the diesel, the nearest alternative, with 45.5% consideration.

Interest in hybrid vehicles increased from 48.8% to 52.2% over the past 12 months, while interest in fully electric vehicles went from 31.6% to 36.2%.

The report also found that while an estimated 77.5% of vehicles currently run on petrol, only 63.7% of drivers say that their next vehicle will have a petrol engine.

Previously, the Australian Automobile Association (AAA) found that the average Australian metropolitan household is spending $736 more on transport compared with a year ago, with the cost rising $172 from the prior quarter, in part due to rising fuel prices.

The Australian Competition & Consumer Commission (ACCC) also encouraged Australians to shop around for petrol, finding that drivers could save up to $520 per year by buying at the bottom of the petrol price cycle.

Roy Morgan industry communications director, Norman Morris, partially credited the growing interest in hybrid and electric vehicles to major car brands developing and producing more environmentally friendly models:

“A recent example of this is that Volkswagen has just announced that it will launch its last generation of vehicles using combustion engines in 2026 and focus on electric cars instead.”

“Vehicle purchase intentions can be influenced by fuel considerations, however to date, this has been a long term indicator in converting this to actual sales. This is illustrated by the fact that despite high consideration levels among Australians for both hybrid and fully electric vehicles over the last eight years, they still account for around only 1% of total vehicles. The challenge is to convert fuel consideration into vehicle sales. There are some positive signs in this research that this will occur, as evidenced by the fact that there has been a very positive level of drivers saying that their next car is most likely to be a hybrid or fully electric.”

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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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Learn more about car loans

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. 

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!

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 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 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 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.

How much is my car worth?

If you own a car, it may be something that can help you bring down the cost of your next vehicle purchase through its sale. However, before you can do that you’ll want to find out how much your car is worth.

Your car’s worth can depend upon various aspects, including:

  • Age
  • Condition
  • Model and make

A great starting place for aspects of this includes websites that offer online valuations, allowing you to enter your car’s make, model, year, badge and description, with the listed results displaying a price guide based on both selling your car privately and through a dealership.

Both have pros and cons, as cars can be very profitable, something that will no doubt impact any chance you have to make the most of your car’s value upon sale. Dealerships will try to profit on your trade-in by buying it for less than they can sell it for, so you shouldn’t expect the same price selling a car to a dealer that you would necessarily get selling a car privately.

Should I service my own car?

There are also costs associated with vehicle ownership, such as paying for petrol and the obligatory ongoing maintenance. But should you cut down on costs by servicing your own vehicle?

If you’re considering getting out the tool box, spanner, and grease-laden towel, you need to carefully weigh up the risks and benefits. A trained mechanic will need to complete certain tasks, while you may be perfectly capable to handle other aspects yourself.

If you’re short on time, it may be worth paying for the convenience of a full vehicle service. However if you’re trying to slash your expenses, there are some basic maintenance tasks that you can complete yourself.

You should call a mechanic if you’re unsure about a vehicle maintenance task you’re about to take on. However there are a number of maintenance tasks that you may be able to complete with your own two hands including:

  • Replacing your car battery
  • Changing the oil
  • Replacing worn windscreen wipers
  • Replacing blown fuses

Remember to keep your car’s body in good condition, by washing and applying a protective wax on a regular basis, too.

Always check your car warranty agreement as some new car purchases come with an extended car warranty provided your services are conducted at the vehicle service centre where you purchased the car. In these circumstances, you may find the service fee is capped, alleviating some of the maintenance woes.

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.

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.

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.

What is a loan term?

The loan term is the amount of time the lender gives you to repay the car loan. For example, if you take out a $20,000 car loan with a five-year loan term, you would be expected to pay off the entire $20,000 (plus interest) within five years.

Can an individual apply for a chattel mortgage?

Lenders offer chattel mortgages as a way to finance vehicles used for business purposes. Companies, as well as individuals, are eligible to apply for and receive chattel mortgages. The essential eligibility requirement is that the vehicle is used for business at least 51 per cent of the time. If you’re a tradesman and require a new utility vehicle to move equipment, you can apply for a chattel mortgage to finance the purchase.

A chattel mortgage for individuals is an option if you’re self-employed and have an Australian Business Number (ABN). You’ll also need to be registered for the Goods and Services Tax (GST) and have a clear credit history. Like all other loan types, you’ll have to prove your capability to service the loan to qualify for a chattel mortgage.

You’ll retain the ownership while the lender holds the vehicle as security for the loan in a similar way as they would a property with a home loan. You repay the borrowed amount in predetermined monthly instalments. Once you repay the entire loan amount, the lender will remove the mortgage.

What is trade-in value?

The trade-in value is the price you could realistically charge if you were to sell your car to a dealer while buying a replacement vehicle. Generally, a car’s trade-in value is less than its market value. That’s because the dealer has no interest in buying your car unless it can make a profit – which can only be done if the dealer has room to increase the price.