Hi guys,
I'm 23 years old and am buying a new 2017 Honda Civic RS through a Honda dealership.
The car is about $37,500.
I'm paying $20,00 via bank cheque and want to finance the rest.
I'm new to being an adult and am seeking advice as to where to go for financing?
The car yard go through bank of Melbourne (I think) and said they can put me at 5.9% (If that makes any sense). Are they stooging me?
Someone send help. I'm picking the car up this Saturday.
Thanks in advance.
I think that's where I got the 5.9% from?
How do I tell?
What's the rate and what's the fees and charges
I need to double check the fees and charges with them. All I remember is their finance woman said 5.9% comparison rate across 5 years. I'd end up paying about $80 a week.
And I'm pretty sure it was like a $1000 fee just to get the loan through them or something, but she avoided talking too much about this stuff.
They haven't sent me through any further information or anything about their financing. As it stands as far as they're concerned I might go to pick it up this Saturday and they'll just ask me to sign up with them and be peachy with that.
This is my first time so I haven't really known what to do and it's gone over my head a bit.
@Sender00: use this as a decent rate to compare
https://www.peopleschoicecu.com.au/rates/personal-loans/pers…
Thanks for all your help so far, Chumlee.
What do you think of this?
https://bankaust.com.au/personal/borrow/personal-loans/car-l…
@Sender00: it's alright. $150 fee is about standard.
Ring the dealer and ask:
What's the interest rate
What's the comparison rate
What's the fees and charges
This way you can make a fair comparison
It's not a big loan, check some of the credit unions for decent rates. I'd also pay it off over 1 or 2 years, not 5; and choose a product that will not penalize you for paying it off quicker (like some of the dealership finances will). e.g. https://www.cua.com.au/loans/personal-loans/car-loan
Next level ozbargaining would be to get a citibank fee free credit card, get a balance transfer at 0% interest for x months, and a cheque to self, but this will take 3-4 weeks to sort out.
I wouldn't buy into all the "you should have bought x or you should never buy new or only buy what you can afford in cash" rhetoric, enjoy your new car :-)
It's bad decision to buy a brand new car with finance.
With $20,000, you can buy almost new Mazda 3, Corolla, or Hyundai I30 !
I appreciate your response however I have already gone through with the sale. All that's left is financing. I can either go with them when I pick it up. Or I can figure something else out in the meantime.
It's totally up to you.
I only buy houses with finance, nothing else :)
How do you work out what finance is best?
For what it's worth, I could buy the car out in cash. However my rationale for finance is that I'd rather not dent my savings so significantly and I think it would work somewhat in my favour to show that I have paid off a small loan when I go to get a home loan. (off the point though)
@Sender00: you'll be paying interest on the loan, which will be more than the interest received on your savings. so the loan will be costing you more.
buying a brand new car will be costing you more.
buying a $37,000 car at 23 (that's your choice, congratulation) but you don't want to dent your savings?
in 2 years the car will be worth $25,000. you'll still be paying the loan (and interest)
it's very un-ozbargain.
Hi Altomic. This sounds like solid advice. I'm definitely trying to be smart and considering all options. I could buy it outright with no loan. But then I lose half of my savings, which would look bad, and I probably wouldn't prefer. But I am logical and will take whatever is the best option.
I just don't really know what I want to do. Being an adult sucks.
Going to get a home loan, they dont care about that stuff. It is a straight up calculation of servicing income and genuine savings. If anything if you attempt to buy a house while having the car loan on you, bank will tell you to pay off the car loan to improve serviceability like they did with me.
@Sender00: You have to think long term, buying cash might be an immediate dent in your savings but a loan is going to cost you thousands over the coming years. Money you'll never see again. Buying cash means you have those future thousands in pocket.
Buy a semi recent model used car in cash, cars have had solid features and safety for quite some time now. Why would you need a brand new 37k car? Even buying the same car you're aiming for that's used and a year old would already be saving you several thousand.
@TheBilly: I am in a similar situation, any idea if a novated lease on a car would be considered as having a loan when you apply for a home loan?
Yes, it will be in some way. If the employer takes this out of your pay, then you have less income to service the loan. It really comes down to how much money you have coming in as an individual.
Well you came here rather late.
No saving you from financial ruin now
Excuse me but I certainly can afford to pay the car in cash. Perhaps you missed the point where I am just asking for advice about car financing.
You are being dramatic.
Try VW finance. They're usually pretty competitive. And will finance cars other than VWs.
Hi mate,
Mortgage broker here, but one of my colleagues used to run the finance department at a large dealership.
Few things to keep in mind when getting a car loan:
Always compare repayments, not just interest rates.
When comparing options, make sure they have the same structure (loan amount including fees, term, balloon)
Dealerships finance teams are not as heavily regulated (yet) as brokers or banks. They will sneak additional fees in wherever they can, and will try to avoid discussing this with you.
Hi Sweefu,
I Appreciate the response. I will keep these things in mind.
Thanks!
Go to your bank and ask what they can provide and compare.
Even show them what the dealer is offering.
Compare monthly payments and fees and length of time.
I think you said above that you can actually purchase the car outright. If you can, it is probably advisable unless you have a way to make more money with your money, than the interest you will be paying. Also, making the mistake of buying a brand new car myself in my twenties, one thing I learnt was the dealership finance (nissan/toyota) operate in a way where the interest is collected very early in the loan so for the first year you are paying almost no principal and only interest. It is very difficult to get a schedule out of financiers and likewise the proportion of your minimum payments split to PandI are not outlined in the contract. Buy it outright if you can, then start saving again, nothing wrong with that.
Also if you plan to have a house anytime soon the liability on you will affect you more than the lack of savings - i.e borrowing capacity.
Also, making the mistake of buying a brand new car myself in my twenties, one thing I learnt was the dealership finance (nissan/toyota) operate in a way where the interest is collected very early in the loan so for the first year you are paying almost no principal and only interest. It is very difficult to get a schedule out of financiers and likewise the proportion of your minimum payments split to PandI are not outlined in the contract
Also if you plan to have a house anytime soon the liability on you will affect you more than the lack of savings - i.e borrowing capacity.
Sorry to sound stupid, but can you explain the above a little more for me?
What he probably means is that if you change your mind and decide to pay off the loan earlier, you will find out the amount owing is not much less than what you have originally borrowed because your first repayments have been used to pay off the total interest years ahead.
Correct
Financing a car…it's just not the ozbargain way.
Better finance the whole amount so you have better cash flow
Sound financial advice:
DO NOT BUY ANY CAR YOU CANNOT AFFORD TO PAY CASH FOR.
Cars are a losing proposition.
The second you drive out of the showroom you will instantly loose at least 5,000.
Borrowing money to buy a depreciating asset is the most ridiculous thing any sane person can do.
Only if it is for business purposes and you can write off the repayments against your tax does it make sense - and only just!
Either buy a new car under $20,000 of which there are plenty of just buy a near new used car for even less.
And never ever borrow money via a car yard!
Just keep in focus when you sell the car how much money you will lose.
Depreciation is by far the biggest cost of owning a car. Not petrol, nor insurnace.
Hence the best objective is to minimise that depreciation loss.
PS unless you have already paid your $20,000 you can always pull out. There is no penalty for doing so. yes, you can even get back your deposit.
That is all.
+1 for always paying cash for a car. It's what I have always done. Otherwise you are throwing your hard-earned money away by feeding leeches. If you only have $5000, then buy a $5000 car. Admittedly, I have never purchased a new car (and never would), but have spent as much as $30,000 on a second-hand vehicle. The only thing I have ever purchased through finance was my home, which was paid of as quickly as I could - and I mean quick. Clearly, I don't have the urge to contribute to ever-ballooning bank profits, nor the obscene bank CEO salaries and bonuses.
Ya no… carz r tuff though.
How are ya ment to go to da natz withot a car!?!?!?
I agree with the "only buy it if you can afford to pay for it outright" sentiment. Lending money on a rapidly depreciating asset to keep savings doesn't make financial sense. If you actually can't afford it and you still want it, well it might not be the smartest thing ever but hey that's up to you!
Also having worked with F&I people at car dealerships it's VERY unlikely they are offering you a good deal - go to your bank, call up iSelect, google car loans comparison, etc.
Hidden costs in financing is the killer.
Acceptance fee, MONTHLY/WEEKLY fees, per_payment fee and etc.
It might work at the end but it is also expen$ive at the end.
And there is an alternative.
Quite a number of credit cards offer Interest Free Balance Transfers for up to 18 months. Some banks charge a 2% once_only that is equivalent of paying interest … beware of this.
ANZ has been offering free-free BTransfers up until 13 September 2017. So this is real and not my imagination or from a bygone era.
If you can get an $18K Interest Free Balance Transfer then you can finish paying "in cash" (bank's money) and avoid those multiple mysterious hidden fees.
Some banks offer free BT to existing clients, some banks require a new CCard to get a BT.
Just an idea.
Hi LFO,
Thanks heaps for the insightful response. Much appreciated.
Now thats a bit of lateral thinking!
Thanks for your responses everyone.
I've looked into the advice given and done tonnes of research on different banks and comparison rates and loan offers.
I think I've been swayed to pay the car in cash. Ultimately it just sounds more logical to pay it off because I can afford it rather than get a loan just to feel better about not seeing a bulk amount of savings disappear.
Tomorrow I'll call the car yard and let them know I am not interested in using finance options for payment and that I will just pay as is.
Thanks again.
Good Call
I did mine about a year ago. Always look at the fees because some companies will offer a low interest rate but jack the fees up. I got a solid one at ~6%/p.a. for a 5 year old car with like $150 start up fee no other fee's. For a brand new car you should be able to find better. Also if you can afford to go for a lower loan term such as 3 years otherwise check if extra repayments can be made without any fee's. The shorter you pay it off the less interest you pay.
What's the comparison rate?