Last week, an interview with a TV personality was published in a Brisbane newspaper. In it, she described how at the age of 16, she was ripped off by a motor finance company. Her story isn’t uncommon: in the past, arrangements involving high interest rates and unreasonably long terms left many customers feeling bruised and angry.
It’s not surprising that this kind of shady misconduct left car loan providers with an image problem. Since those days, however, increasing regulation by the Australian Securities and Investment Commission (ASIC) and media exposure has made such misconduct a much rarer event.
Misleading customers is something that the finance industry rightly condemns. Thankfully, changes in economic conditions and managing personal finances have allowed the benefits of using car finance companies to come to the fore. Why? One of the biggest reasons is that obtaining loans enables customers to have greater financial freedom. Instead of saving up for years to buy a car in a cash purchase, you can purchase a vehicle while keeping more money in your wallet or purse.
You’ll still have to make regular repayments, of course, but the major difference is that you’ll have possession of the vehicle at the beginning of that period, rather than the end.
Car finance also enables you to purchase a newer car than you might if buying with cash. While the initial price may be higher, you’re less likely to be paying for a growing number of repairs that arise within a year or two. Total up your expenditure five years down the line and you’d probably find that the lower cost of a cash purchase to be offset by the additional cost of repairs.
So why is approaching a car finance provider better than obtaining finance from the bank or, say, a motor dealer? Particularly as the motor dealer seems to offer the lower rates?
Well, we’ve written before about hidden costs that are obscured by low interest rates. It’s important to consider the total costs involved, not the published rates. Car finance companies will compare loans that are available to find the arrangement that best suits you.
That means identifying the best loan structure for your financial situation, in terms of what you can afford to repay and for how long. What’s more, it means getting the arrangement approved by the lender.
There’s one thing you can depend on. It’s in the finance company’s interests to find you the best deal, as they’re relying on your word of mouth recommendation for more business. In this age of ‘easy come, easy go’ online reputations, that matters more than ever before.