guaranteed car finance
Once you have decided upon your budget and the make and model of the car you would like to purchase, it is time to shop around for the best price. Price can vary from dealership to dealership. Special offers will happen at different times through the year and most dealerships will reduce prices just before the next year’s models are delivered.
A new car can be quite expensive. It pays to do your homework so that you know exactly how much you can borrow without stretching yourself.
Many car dealerships will offer ‘finance’ (a loan) to their customers through a credit provider, but it is also worthwhile shopping around to get the best deal. Banks, credit unions, and other financial institutions all lend money and can be cheaper and more flexible than car dealerships. All credit transactions that are predominantly for personal, domestic, or household use are regulated by the Consumer Credit Code. If the credit is provided wholly or predominantly (over 50%) for business purposes, the Consumer Credit Code may not cover you.
Loans
When comparing loans you need to have a good understanding of the terms used in loan contracts. The total amount you pay to the lender will depend on the amount you borrow, interest rate charged and the length of time that you borrow the money (the term of the loan). Lenders will usually calculate interest charges on a daily basis. Multiplying the debt that you owe each day by the daily interest rate calculates the interest. These interest charges are usually added to your loan account each month.
Balloon repayments
An increasingly popular method of financing car purchases is a Balloon Loan. You pay reduced monthly instalments for the term of the loan, with a large final payment (‘Balloon Payment’) that clears the debt.
You may have a number of options available to you in dealing with the balloon payment, namely paying the amount in full, re-financing or rolling over into another credit product.
exactly how much you can
Car dealerships may provide balloon loans that offer a guaranteed buy-back price on your vehicle. Make sure you are aware of any conditions attached to these arrangements. For example, if you buy a car on the basis that you are promised a buy-back amount for the vehicle after a period of time, you could find this amount is dependent on factors such as the condition of the vehicle and kilometres travelled.
Leasing
Leasing is another type of finance that may suit people who regularly trade-in their car. In a lease arrangement where there is no obligation to buy the car, the ownership stays with the lender and the car is returned at the end of the lease term. You can terminate the lease early by returning the car, but there is a cost involved and this should be explained in the contract. During the term of the lease you are responsible for making the lease repayments and for the car’s running and maintenance costs.
When you lease a car the payments are based on the difference between the car’s sale price and what the car is estimated to be worth at the end of the lease (its residual value). There can be benefits associated with tax and GST if your car is for business use. You should consult your accountant to determine if these benefits apply to you.
You need to be careful as some leases have conditions that base the residual value of the car on the distance the car will travel and on its condition. If, for some reason, the car is not worth the estimated residual value at the end of the lease then you may have to make up the price difference. If you intend to buy a car on a lease agreement, make sure you are aware of any conditions on the car such as mileage and its condition at the end of the lease period.
If you are leasing a car which gives you an option to purchase, the lease is covered by the Consumer Credit Code. This does not apply to leases which are employment related.
Varying a credit contract
If you find you have problems repaying your loan the law allows for a variation in a credit contract on the basis of hardship, but the following circumstances must exist:
• your inability to make repayments must be due to unemployment or illness or some other reasonable cause
• you expect that you will be able to make repayments if they are altered the near future.
Contact the lender and try to come to an arrangement to If you are having difficulties coming to an arrangement with the lender you can get help from the Office of Fair Trading or a financial counsellor.
Cooling-off period
The Motor Trade Legislation Amendment Act 2001 came into effect on 28 January 2003. This introduced a one-day, waivable cooling-off period for motor cars purchased by a linked credit arrangement.
A linked credit arrangement is where you purchase a car from a dealership and the dealership:
• arranges your loan for the car, or
• supplies application forms for (or a referral to) a credit provider.
The cooling-off period begins when the contract is entered into and generally ends at 5pm on the next day on which the dealer carries on business. The amendments to the Act allow buyers and dealers to negotiate an extension or waive the cooling-off period, however it is advisable for consumers to retain the cooling-off period and safeguard their rights.
During the cooling-off period the purchaser can cancel the contract by giving a signed, written notice to the dealer. If the contract is cancelled, the purchaser will be liable to pay the dealer $250, or 2% of the purchase price, whichever is the lesser amount. • the situation is only temporary and it should improve in.
Contracts and deposits
If you sign anything at a car dealership, it is probably a sale vary the loan contract. You may also sign a loan application or loan contract on the premises. Contracts are legally enforceable. Read all the documents carefully. Do not sign anything the term of unless you understand what you are agreeing to and you are certain you will be buying the car.
If you have decided to buy a car but you need to have a loan approved first, make sure that contract that completing the purchase is conditional on you obtaining the loan. If you have this specified in the contract and you cannot get a loan after reasonable attempts, you may be able to cancel the contract and have the depositreturned to you.
Understanding common contract terms :
1. Principal > The amount you borrow.
2. Interest > The charge from the lender for using its money. This is usually expressed as a yearly rate and called the annual percentage rate. This means the rate will remain the same Fixed for a set amount of time. This offers interest rate greater control over your finances because the repayment amount will always be the same. The fixed interest rate and the time period it applies to must be stipulated in the credit contract. Generally you will not be able to make more than the agreed repayments (ie. pay the loan off more quickly). Check the contract carefully for any conditions that apply.
3. Variable interest rate > This means the interest rate will move up and down depending on the market.
4. Split interest rate > You may be able to choose to split the type of interest rate that applies to a loan.
This occurs in two ways:
a) a fixed interest rate applies for a set amount of time. When that time elapses, the rate can be changed to a variable interest rate.
b) part of the amount borrowed has a fixed interest rate applied and the remainder amount has a variable interest rate applied.
