Planning To Upgrade? What Reserve Bank Rate Rise Could Mean For Car Finance Rates, Boat Loan Costs And Business Finance Rates

The September RBA rate rise of 0.25% can flow through to car finance rates and business finance rates, subject to individual lender decisions. If you were planning to upgrade your vehicle or boat for the upcoming holiday season or if you are taking on commercial loans to support cash flow, the latest Reserve Bank cash rate decision may have you hitting the pause button.

Before cancelling that upgrade completely, find out more about interest rates - what the cash rate increase means for consumer and commercial loan rates, what assistance is available to help you find your best possible rate loan and how you can improve your prospects.

What Determines Personal Car Finance Rates?

Personal loans for cars, boats, caravans and motorbikes fall under the Consumer Credit category. This type of finance is available through many lenders – banks, finance companies, dealers, manufacturers and through brokers.

Consumer credit lenders set their own rates with the cash rate used as a foundation point. Rates on the same type of loans can vary across the market as lenders have varying funding costs and approaches. Many will react to a Reserve Bank rate rise or cut, but the extent can vary. Secured loans attract lower rates than unsecured loans as lenders have the goods being financed as collateral for the funding. Unless otherwise noted, lenders advertise their best rates on new goods (as opposed to used) for loan applicants with good credit scores.

When determining rate offers, lenders assess the applicant’s financials and credit score and the size of the loan requested compared with the value of the goods being financed. Think of interest rates as an assessment of the risk of lending to an individual. A less than good credit score and a high value loan may be seen as a higher risk than lending to someone with a good credit score.

To be offered the lowest boat, caravan and car finance rates, buyers can look at reducing the loan required with a higher deposit and improving their credit score by paying off other debts. Using a broker can be useful in comparing multiple lenders to find buyers their most suitable lender and most competitive loan rate.

Lending Market – Business Finance Rates

Similar principles and guidelines apply to the commercial lending sector as described above for the consumer credit market. But the business market tends to be more diverse with non-bank lenders specialising in certain industries and markets such as asset financing, heavy equipment and working capital commercial loans.

The commercial loan market can be more competitive than the consumer sector as lenders do not need to abide by Consumer Credit Laws. Specialist lenders can be more flexible when assessing applications.

The commercial lending sector can be highly competitive. While most will need to change their rates following RBA rate decisions, there are variations among lenders, with potentially better offers available. Business owners can use a broker to have their best rates found for them.

Understanding Reserve Bank Rate Rise

The Monetary Policy Board of the Reserve Bank raised the official cash rate by 0.25% to 4.6% at its 29 September meeting. In announcing the decision, RBA Governor Michele

Bullock said that inflation remained at very high levels and the risk identified early in the year - the Middle East conflict going on longer than expected, had materialised. The Board also added the boom in AI as another reason. Pushing up costs of software and technology products and data centre construction impacting resources and materials for the construction sector.

Interest rates are the key and only tool that the RBA has to address high inflation. Ms Bullock said the Board is focussed on driving inflation down to the target of 2-3%. Further rate rises were not ruled out if the data indicated this was required.

The RBA Monetary Policy Board next meets to discuss interest rates on 2-3 November. The Australian Bureau of Statistics (ABS) will release the September inflation data on 28 October.

For those with existing fixed rate loans, the rate and the repayments are not affected by RBA and lender rate rises. Variable rate loans are subject to change if the lender responds to a RBA decision.

Using a Broker to Find Your Best Rates

For those wanting to upgrade their vehicle, possibly to a more fuel-efficient EV, a boat for the summer holidays, or business assets to achieve productivity gains, speak with us about your finance.

While buyers may only have the time and access to a small number of lenders to find the best rates, we have access to a large lender panel. We use our lender connections and market intel to quickly source highly competitive rates across our portfolio.

For your best car finance rates and business finance rates following the latest Reserve Bank rate rise, connect with Jade Finance.

DISCLAIMER: NO LIABILITY IS ACCEPTED IF ERRORS OR MISREPRESENTATIONS ARE FOUND IN THIS ARTICLE. THE ARTICLE IS PREPARED AND PRESENTED FOR GENERAL INFORMATIVE PURPOSES AND IS NOT INTENDED TO BE THE SOLE SOURCE OF INFORMATION FOR MAKING FINANCIAL DECISIONS. THOSE REQUIRING GUIDANCE AND ADVICE SHOULD CONSULT A FINANCIAL ADVISOR.