FAQs
Car Interest Rate FAQs
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Across business vehicle finance and personal car loans, a fixed interest rate applies. Variable interest rate car loans only apply to some Unsecured Personal Loans. This type of can be sourced at either a fixed or variable interest rate, dependent on the lender and borrower’s preference. Fixed interest rate car loans provides you with certainty moving forward. By securing your loan at a fixed interest rate we also fix your monthly repayments over a fixed loan term. So you have the assurance that your loan repayments won’t increase over the term of your car loan. Fixed interest rates tend to be standard across the motor vehicle lending sector.
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Yes. There is a very useful resource provided witrh our which allows users to quickly see the different car loan interest rates being offered by a range of leading lenders. This is primarily designed for personal motor loan applications. This Compare Lenders tool in a simple table format which shows the lender name, advertised interest and comparison interest rate. So you can quickly and easily compare the rates and you can go a step further to compare loans. Above the table are two fields where you can enter the amount you want to borrow and the loan term you want to repay the loan. The formulations immediately adjust the figure in the end column which is the estimated monthly repayment for each lender.
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The interest rates advertised by lenders on car loans should be taken as a guide and are the cheapest being achieved by that lender in the current environment. It will depend on the quality and quantity of financial documentation you provide in your application and your credit profile as to what interest rate we will be able to achieve for your loan. For businesses, the more documentation including BAS statements, tax returns, profit and loss statements, annual business accounts etc that you can provide, the more positive this will impact on your loan offer.
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A comparison interest rate is a concept which only applies to consumer finance that is in this case, to personal motor loans. The advertised interest rate or current interest rate that is displayed by lenders is essentially the basic, cheapest rate we can achieve and is in some respects the raw rate. But all loans will include some fees and charges by the lender and these can vary from lender to lender and for individual applicants. So when the fees and charges are applied to the loan and averaged across the entire loan term, the interest rate will be higher than the rate that was applied to the principle loan amount. That is the comparison rate. The comparison rate is worked out when all fees and charges have been included in a loan and the total loan amount is averaged over the loan term. It is a requirement by law that all lenders in the consumer finance space display a comparison interest rate. It is based on a specific example of a purchase. For example, a set car which was purchased at a set dollar amount. Read the fine print for details. When comparing interest rates across lenders, consumers should compare the comparison rate as it gives you a better indication of the level of fees and charges applied by that lender.
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No. Car loans are usually sourced at a fixed interest rate so customers can have confidence that their vehicle loan will remain the same for the complete loan term. The exception being Unsecured Personal Loans which may be either at fixed or variable interest rates. For Personal Secured Motor Loans and all Business Vehicle Finance, the interest rate is fixed. This means customers do not need to address changes to their loan for the loan term. The interest rate determines the monthly repayments, so that amount will also remain fixed for the loan term. When you hear media and advertising referring to people ‘fixing their loans’ this is usually in reference to home mortgages which are structured differently from car loans and can have variable interest rates, draw down accounts and other aspects which may change over the much longer term of the home loan, compared with a car loan.
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Individual banks and lenders determine the interest rate that they will offer on a particular category of goods based on a number of factors. These factors include their exposure to or interest in extending financing in that area (say motor vehicles), their confidence in the sector, the economy in general, global economic and financial drivers and the costs that they must pay to access the funds they need to extend loans. The price that lenders pay for their finance is determined by what is known as the official cash rate and this is set by the Reserve Bank of Australia. When the RBA cuts the rate at which banks can borrow money, interest rates on many goods and loans is usually reduced by not always by the full amount of the rate cut. These rates determine the rates that individual lenders offer on car loans.
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In determining the Interest rate that will be offered on any loan, each lender that we approach on your behalf, does what’s called a risk assessment of the application. That is the level of confidence the lender has in the applicant being in a position to meet the loan commitments. In general, businesses are seen as a lower risk for finance than individuals so that category of loan attracts lower interest rates. Businesses are usually seen as more secure than individuals and may have a greater asset base in terms of the business itself and a more extensive trading history to assess risk. Interest rates on all types of business loans, not just motor vehicles, is always lower than personal interest rates for these reasons.
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Finance brokers operate on a business model around achieving the lowest interest rates for customers. As a car finance lenders, brokers are accredited with a large number of banks and non-bank lenders. By having more sources, there are more options to find you the cheapest interest rate. Some non-bank lenders operate only via a broker network and these are the industry-only lenders that are more open to offering better deals than the major banks in special cases. Brokers can write a lot of business in motor vehicle finance and that gives them bargaining power which to negotiate the cheapest rates for our customers.