7 Tips for Negotiating Car Financing Terms

Buying a car is an exciting milestone – it marks the start of a new adventure.

While one of the major hurdles to owning a car has always been its price, the option to take out a loan and finance your purchase has allowed so many more people to enjoy that new car smell. However, navigating the world of car financing can be a daunting task. From interest rates to loan terms, there are various factors to consider when securing a car loan that fits both your budget and financial goals.

To help you make informed decisions and give you an added edge, here are 7 valuable tips to keep in mind when negotiating car financing terms.

1. Understand Your Credit Score

Before entering into negotiations, it’s crucial to know your credit score.

Your credit score plays a significant role in determining the interest rate you’ll be offered. Based on previous loan repayments, a higher credit score indicates that you are a trustworthy person to lend to, which often translates to better loan terms. So, to give you the best opportunity to secure more favourable terms, it’s important to obtain a copy of your credit report and review it for accuracy, and if there are any discrepancies, address them before applying for a loan.

Being aware of your credit standing empowers you to negotiate from a position of knowledge.

2. Shop Around for Car Financing Options

When looking for a vehicle loan, don’t settle for the first car financing offer that comes your way.

Instead, research and compare car financing options from various sources, including banks, credit unions, online lenders, and dealership financing. While each vehicle loan option may offer very different interest rates, terms, and incentives and some will be more favourable than others, by shopping around, you can identify the best deal that suits your needs and budget.

3. Get Pre-approved

Getting pre-approved for a car loan before visiting a dealership can give you far more leverage during price negotiations.

The pre-approval process involves submitting a loan application and receiving a conditional offer from a lender. Having a pre-approved car loan amount in hand gives you a clear budget and prevents you from overspending. It also shows dealerships that you’re a serious car buyer with little room for negotiation, which may lead to more favourable pricing.

4. Focus on the Total Cost

When negotiating car financing terms, it’s easy to get caught up in monthly payments. However, focusing solely on the monthly payment can lead to a longer loan term and higher overall costs.

After all, small monthly repayment amounts are only favourable if the term of the loan is likewise small.

That’s why it’s important to consider the total cost of the loan, including the interest over the life of the loan. For assistance, use an online loan calculator to estimate the total repayment amount based on different interest rates and terms.

5. Negotiate Interest Rates

Interest rates significantly impact the overall cost of your car loan. What is less obvious is that there is significant wiggle room for negotiation with your lender.

As such, you should research current market rates and use that knowledge to negotiate. Furthermore, if you have a strong credit score, you may have further room to negotiate a lower interest rate. Another handy tactic is to, if possible, bring evidence of competitive offers you’ve received from other lenders, as this can strengthen your negotiation position as well.

6. Be Wary of Add-ons

During the car financing process, dealerships may offer various add-ons, such as extended warranties, gap insurance, and protection packages. While some of these offerings can provide value, others may not be necessary or can be obtained at a lower cost elsewhere.

Don’t just tick the box. Instead, carefully review the details of each add-on and decide whether it aligns with your current or future needs. Remember, don’t feel pressured into purchasing extras that could inflate your loan amount.

7. Review and Understand the Car Loan Terms

Before signing any car financing agreement, carefully review all terms and conditions. Make sure you understand the interest rate, loan terms, monthly payments, and any additional fees. If you have any questions or concerns, don’t hesitate to ask for clarification. It’s essential to be fully aware of what you’re committing to before finalising the deal.

What more direct help to never regret a car loan choice?

To navigate the complexities of buying a car, it helps to have guidance from car-buying experts who can find you the best deals and make the experience seamless as you choose your dream car.

If you find that you still have general questions about car financing, our team at Private Fleet will be happy to answer your concerns and help you find the best deals for your car purchase.

Simply reach out to us and we can have a chat about your options.

Find the right (and affordable) vehicle for you with Private Fleet.

Private Fleet empowers you to gain all the benefits of a fleet purchase, but as a private buyer.

Backed by decades of vehicle industry experience, fleet buying power and a network of car dealers across Australia, we are here to ensure that buying your next vehicle will be as straightforward as possible for you.

Shopping for a car is an enjoyable process – let us make it hassle-free, too.

Reach out to us today for a seamless and simple car-buying experience.

How to Choose Between a New and Second-Hand Car

We all know that feeling. Bringing home a brand new, spick and span car that you’ve just picked up at the dealership. It’s your pride and joy, with all the perks that come with a modern car.

Naturally, you’ll be content with your decision, but not everyone reaches the buying stage with as much ease. In this case, it’s worth tallying the pros and cons when it comes to buying a new car and second-hand vehicle.

Depreciation or security?

New cars depreciate in value as soon as they leave the dealership. When buying for private use, you may not be able to claim depreciation as a tax deduction.

Many people ignore this substantial cost because it is a ‘notional’ cost, whereby there is no cash impact after the initial purchase. Nonetheless, you shouldn’t overlook this cost, because a 40% haircut in value over the first three years is enough to dictate the flexibility of your ownership of said car.

Meanwhile, a new car offers security for a new owner. First of all, you are not buying someone else’s mechanical problems.

Secondly, if you encounter any manufacturing faults, these will generally be fixed quickly at no cost under warranty, particularly with manufacturers’ these days offering extended warranties of seven or even ten years.

Tying into this is a third point. Most of us need to take out a loan to pick up a ‘new’ set of wheels, even if it is second-hand. Typically, the interest rate on a new car is likey to be less than that of a used car, albeit this takes into account the higher purchase price that leads to higher interest costs over the loan.

The first owner of any car absorbs the steepest depreciation costs, so a second-hand owner benefits from a lower purchase price, a slower rate of depreciation, and lower insurance costs.

However, for all these savings, there are significant risks attached to buying a used car. These cannot and should not be overlooked. Not only is there a higher risk of incurring costs for unwarrantied repairs – and that owner’s manual is not easily verifiable – but maintenance costs are likely to be higher due to the car’s age.

Do you really want to run the gauntlet with the risk of a major mechanical failure a;ways looming?

Pricing or features?

New cars, particularly those made in the last few years, are substantially safer than older cars. They often have desirable features that a second-hand vehicle might not be equipped with. For example, modern-day essentials like autonomous emergency braking, reverse camera, rear-cross traffic alerts, blind-spot monitoring, and much more.

Some buyers achieve major savings while still enjoying most of the benefits of a new car by opting for a near-new demonstration model. In this case, you can find a car that is practically new but sold at a steep discount.

Alternatively, a ‘certified pre-owned’ vehicle can also bridge the gap between new and used. Pre-loved cars sold under this program are subject to rigorous inspection, and are usually covered by a manufacturer warranty.

At the end of the day, most buyers will come to a decision based on affordability. But the reality is, there are risks abound. You would almost be better served looking for a more affordable new car, than a discounted second hand that could be hiding all sorts of problems.

If you do opt for a used car, however, be sure to have it thoroughly checked out by a mechanic before you agree to purchase it, and don’t be afraid to walk away from the deal if things don’t stack up.

4 Common Mistakes in Car Financing and How To Avoid Them

Buying a car is part of every Australian’s dream – it’s probably a really close second to owning your own home!

So, when it comes to vehicle finance, you want to make sure that you’re getting the best deal when you finally get your very own car. However, car financing is an intricate process, and it’s easy to get lost or overwhelmed, especially when you have your eyes set on your dream set of wheels.

This may lead to car financing mistakes that could cost you in the long run.

But don’t worry, there are ways to avoid these mistakes.

In this article, we’ll discuss the most common mistakes people commit when financing a car purchase and share some tips on how you can avoid these and save money as you prepare to drive the car of your dreams.

But just before we begin, remember, this is just general information and is not meant as financial advice. It’s smart to talk to your finance specialist first for more personalised info.

What is car financing?

Let’s start by exploring how car financing works.

Car financing refers to the number of options that you can choose from to buy your dream car without paying outright in cash. Whether you’re buying a new car or a used one, you can finance your purchase by:

• applying for a car loan
• car finance lease
• Commercial Hire Purchase (CHP)
• novated lease

To learn more about these car financing options, read: What are the best ways to finance your car purchase?

What are common car financing mistakes and how can I avoid them?

With several finance options available out there, it’s important to find the right one for you, depending on your unique circumstances and goals for the car purchase. This way, you can avoid costly mistakes and drive away in your dream car with the best deal.

Here are 4 common mistakes that we often see when financing car purchases, as well as our tips on how you can avoid them:

1. Focusing on monthly payments

It’s a common mistake to concentrate on monthly repayments when discussing your financing options. Of course, it’s easier to think about how much you can afford to pay every month.

However, while it helps to know how much you’ll have to pay monthly, it’s better to have a big-picture look at your financing option. Beyond the monthly payments, check the following:

• the overall cost of the loan
• interest rates
• repayment terms

This way, you can avoid extended loan terms and higher interest expenses.

2. Not leveraging your credit score to negotiate

Finance interest rates can be determined by creditworthiness, so if you have a high credit score, you can negotiate for a lower interest rate.

The average car loan rate is approximately 9.49% p.a. If you can negotiate at least a per cent lower and get an 8.49% p.a. rate for a $20,000 car loan, you can save hundreds of dollars during a 48-month loan term.

If you know your credit score before getting a car and have an idea of the interest rates that match, you can steer the negotiation in your favour and drive away with the best deal.

3. Opting to finance the cost of add-ons and accessories

Next up: let’s talk about add-ons, accessories and warranties.

These costs are typically added on top of the actual cost of the vehicle and, more often than not, they appear as hidden charges that are not explicitly discussed. When you opt to finance these add-ons, you will be charged interest on them which will cost you more in the long run.

So, when you look at your loan contract, ask about every added fee and avoid unnecessary add-ons. If you really want add-ons such as an extended warranty or gap insurance, it may be better to pay for them outright so they don’t add up the overall cost of your loan.

4. Skipping research on financing options

Finally, there’s skipping research and taking shortcuts in car financing.

As in everything, preparing before making a big decision is crucial to car financing. While it’s easy to fall into the trap of settling for the first option you find, extensive research can save you a lot of money in the long run.

By comparing all available options from dealers, lenders and banks, you can get better interest rates and more favourable loan terms.

Now you know the vehicle financing mistakes to avoid!

These are some of the most common mistakes we have seen people commit in car financing, many of which have come at great costs.

However, this is general information only. The right finance option for you must take into account your unique circumstances and your goals for your car purchase – so always do your research.

While we can provide general car financing information, if you have any specific questions, it’s best to ask your trusted financial professional.

To navigate the complexities of buying a car, it helps to have guidance from car-buying experts who can find you the best deals and make the experience seamless as you choose your dream car.

If you find that you still have general questions about car financing, our team at Private Fleet will be happy to answer your concerns and help you find the best deals for your car purchase.

Simply reach out to us and we can have a chat about your options.

Find the right (and affordable) vehicle for you with Private Fleet.

Private Fleet empowers you to gain all the benefits of a fleet purchase, but as a private buyer.

Backed by decades of vehicle industry experience, fleet buying power and a network of car dealers across Australia, we are here to ensure that buying your next vehicle will be as straightforward as possible for you.

Shopping for a car is an enjoyable process – let us make it hassle-free, too.

Reach out to us today for a seamless and simple car-buying experience.

Digital Car Buying

As society has grown to depend on the vital role that online marketplaces play in our lives, they’ve also shifted the landscape in which such transactions take place.

In the car industry, motorists have increasingly voted with their feet – or perhaps more appropriately, voted with the click of a mouse. The high pressure tactics of new car salespeople have turned many buyers away from the car yards. Instead, many motorists now conduct at least their first line of research and enquiries online.

Whether it is P2P websites or online classifieds, car buyers now have a range of outlets available to them at the tip of their finger – all without needing to leave their very lounge room.

At the same time, consumers also have access to more information than ever before, meaning they are better informed than the shoppers of yesteryear. This has meant that motorists have equal footing when it comes to dealing with salespeople.

As a result, the dynamics of the engagement between a buyer and seller have required a shift. Salespeople are now more attuned to the stereotypes that hang over their head and have largely modified their behaviour accordingly.

While pushiness and shrewd tactics still exist, by and large things have evolved more towards an effort based approach to sales. That is, a salesperson needs to put in the effort required to quickly build trust and rapport with their prospective customer on the first visit, or said motorist will simply continue their search elsewhere. But has this necessary change come about too late?

The simple answer, is yes. The fact that technology has been the crucial point in redefining the market speaks to the extent of the shortcomings that were prevalent beforehand. On the part of the consumer, these issues while ‘patched over’, are not easily forgotten.

There are still trust issues there and many motorists will narrow their search before they meet a salesperson. They will use this as the basis of their ‘targeted’ shopping experience, intending to optimise the transaction.

What’s more, digital car buyers now have added flexibility in the form of customisation. Of course motorists always had the option to include extras or upgrades as part of their purchase, but the integrated and streamlined process now details a level of convenience where all options are clearly presented, including a visual perspective, as separate and detailed offerings.

All said and done, the rise of online marketplaces have not been without issue. In some instances, unlicensed second hand car dealers have been operating from the anonymity of their online username. And when a market opens to participants who have not been vetted, consumers may forgo some of the protective measures that have been mandated in the industry by regulatory authorities.

As always, buyers must be prepared to do the necessary research and consider the risks that accompany engaging with those they have not met, or cannot verify.