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Blog   »   July 2014   »   Incredibly Low Vehicle Interest Rates Aren't Low At All

Incredibly Low Vehicle Interest Rates Aren't Low At All

Over the past number of months we have noticed an increasing tendency for car and truck dealerships to mislead clients about the interest rate.

Rates in the 4 and 5 precents have been espoused by the dealers when in reality these rates are in the low to high teens (14% to 17%).

What to do?

First, forget the interest rate, it is irrelevant what rate is quoted, only the dollar repayments are important.

How to Compare Interest Rates

To ensure you are comparing “like for like” make sure you compare the key points and make all quoting use the following:

  1. Use the exact purchase price
  2. Some dealerships quote a genuine very low rate, but if you pay cash or use someone else’s finance the purchase price drops – in short you are paying extra for the car / truck to get a cheaper interest rate which means you are not getting a cheaper rate
  3. Make sure all use a common period for the contract to run, 4 years or 5 years
  4. Make sure you ask for the contract to have no residual – dealers will play with these numbers to confuse anyone getting a comparison, so always use zero to get the true comparison
  5. Do not allow dealers to add the GST back into the repayments – again some dealers will “fiddle” with the GST to make their repayments look better

Once you have established the lender, broker, bank you wish to deal with points 2, 3 & 4 can be changed to suit your specific requirements.

Rate Comparison Example

A recent example of how a client was misled occurred when they went into a dealership to buy a new $27,000.00 car.  The dealership quoted a rate of 4.9%, our rate was higher but the repayments lower!!!!

Dealership Quote                                                         Our Quote

Purchase Price:                 $27,000.00                           Purchase Price:             $27,000.00

Residual:                           $ 9,450.00 (35%)                 Residual                       $6,750.00 (25%)

Term:                                60 months (5 years)             Term:                            60 months (5 years)

Repayments:                     $562.07 per month               Repayments:                $425.34 per month

Hunter Business Finance’s quote was with a 25% residual as we would never do a 35% residual over 5 years, simply because the value of the vehicle at the end of the loan may not even cover the residual, especially when the purchaser was doing 40,000 klms per annum.

The dealership didn’t ask the question of Klm’s or perhaps didn’t even care.

Even though our quoted interest rate was higher and our residual lower, our repayments were $136.73 a month cheaper.  A saving of $10,903.80 on a $27,000.00 car over the 5 year loan.  Don’t be fooled by “quoted cheaper rates”.

We Want You To Get The Best Deal First Time.

Dealers try to make as much as they can out of financing your new car or truck, then when they’re “caught out” they drop the rate and repayments to match.  They don’t deserve your finance business if they mislead you, do they?

Give us a call or drop us an email, we do it right the first time.

 

Hunter Business Finance

1300 137 656

Email: mail@hunterbusinessfinance.com.au

Posted: 11/07/2014 10:20:21 AM by Hunter Business Finance | with 0 comments

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