VW 1.99% Finance on Golf - What's The Catch?

Lj-ball on 27/04/2019 - 19:37
Last edited 27/04/2019 - 22:05 by 1 other user

I'm currently looking at getting a new car.

I'm tossing up between the following:

  • Mazda 3 Hatch
  • Hyundai i30 Hatch
  • VW Golf

Now I've narrowed it down to a model in each range that I like after a few weeks of research.

I was at the VW dealer today and they had '1.99% Comparison Finance' on their Golf range.
That would make their $30k Golf about $120 a week.

I had previously checked a few different calculators and a $20k loan was working out to about $160 a week.

Can anyone explain what I'm missing? Surely VW only has access to the same cost of credit behind the scenes. Why would it be $120/week for $30k when the best elsewhere is $160/week for $20k?

Sorry if this is an obvious answer, I'm 25 and this is my first new car (have driven the same second hand car since my learners 9 years ago), so I'm a bit new to the games the dealers play.

Automotive

Comments

  • WreckTangle on 27/04/2019 - 19:53
    +4

    Balloon payment needed at end?

    • spackbace on 27/04/2019 - 20:01

      Yup, it's like Toyota Access

      $30,000 over 5 years with no interest or fees/charges is $115/week, for comparative reasons

      https://au.volkswagen.com.au/offers-finance/?_ga=2.127310153…

      Read the terms at the bottom, it's exactly like Toyota Access. You're basically renting the vehicle over that period for that amount.

      I'm sure you can still get 1.99% on a regular loan, just don't expect those repayments…

    • j-ball on 27/04/2019 - 20:12
      +1

      Ahh ok, I just had a quick google of that and it would make sense.

      From pulling that thread and a few search strings, it appears they offer the low price because:

      • You take finance from them at a low rate
      • You agree on a guaranteed minimum payment on your car at the end of the term
      • You drive the car and take good car of it (including staying within the km you estimate)
      • You get to the end and either
        • pay them out some amount (I assume the amount would be that GFV?)
        • Trade in/upgrade the car to them for that amount
        • give the car over to them and walk away

      So it essentially sounds like a lease with extra steps I guess?

      Very confusing! Not at all sure about that as it feels like I'd get screwed somehow, I just haven't figured out how.

      Thank you!

      • lubos on 27/04/2019 - 20:24
        +3

        No. The car is yours. You can trash it if you want. You are not leasing it.

        The reason why repayments are low is because of the loan structure. You pay lower weekly repayment but in exchange you will pay large lump sum payment at the end of the loan term.

        How do you get screwed? It's simple - lower weekly repayments can trap you into purchasing potentially more expensive car than you can really afford. When it's time to pay lump sum and you don't have the money, you might be forced to sell the car in order to pay the remaining debt. This is what most people end up doing - then they buy another car on the same terms.

        • j-ball on 27/04/2019 - 20:27

          That's fair enough, and a good thing to point out.

          From the feedback among people here it appears it'll be better for me to secure finance on my own terms separately and negotiate the car price without any of that factored in.

          Thanks heaps for your help! Really appreciate it.

  • spackbace on 27/04/2019 - 20:02
    +2

    $160/week for $20k is crazy… That figure should be closer to $100-120/week

    What interest rate are you working on?

    • j-ball on 27/04/2019 - 20:07

      I just went through the CBA Variable calculator, because that's who I have my other accounts with (home loan and savings).

      The calculator automatically had 13.9% in the box, however it's a field that is editable. I left it at 13.9% because I assumed that was their offering.

      • spackbace on 27/04/2019 - 20:10
        +5

        Yeesh depending on your financial history, on a secured car loan you should be able to almost halve that rate.

        But first buy the car you want, then get various quotes on the finance.

        I'd strongly suggest going into any dealership with a 2nd person, since you didn't even know that Golf would have a balloon payment.

        Someone needs to be the head while your heart is buying the car. Or just someone with more life experience in this

        • j-ball on 27/04/2019 - 20:15

          Sorry to ask a realllllyyyy dumb question.

          Is the purchase process similar to buying a house?

          i.e. I buy the car, somehow make it subject to securing finance?

          I've tried googling but there really isn't a guide that just outlines the basic steps involved in buying a car.

          Thanks a tonne for your help so far, even the advice so far could have saved me a world of unnecessary pain.

          • Halo375 on 27/04/2019 - 22:01
            +1

            @j-ball: Until you have your financed secured - you haven’t “bought” the car at all. Work out what vehicle you want then shop around - focus on your weekly repayments and whether there’s any balloon. There’s nothing wrong with balloons, but you’ll need to work out if you can save up that lump sum or not. DONT RUSH INTO ANYTHING!

      • lubos on 27/04/2019 - 20:11
        +2

        13.9% is a rate for unsecured loans. Car loan is a secured loan and will have a lower rate.

  • [Deactivated] on 27/04/2019 - 20:14
    +9

    About Volkswagen Financial Services

    • j-ball on 27/04/2019 - 20:24
      +3

      That's a really helpful video!

      Painful, as I came exceptionally close to being the very idiot he is pointing out, but it's much better to be informed than to get suckered.

      Thanks for that mate.

    • WreckTangle on 27/04/2019 - 20:37

      Great video!

      I’m not against against balloon payments though, just dodgy low interest schemes.

  • Melb69 on 27/04/2019 - 21:15
    +4

    4 square. The trade in, The purchase price, The finance, The term of the loan. Avoid a trade in, dealer finance and subsequently the term. The salesmen will eat you alive. Many members here will be able to explain better than me. Just sell your own car if you have one rather than trade it in. Get your own finance and terms. Avoid the accessories girl. Just concentrate on the purchase price. If the salesmen says he has the best price and you wont be able to get it anywhere else. Pick up his phone and call another dealer. Especially one they usually compete against.

  • JIMB0 on 27/04/2019 - 21:50
    +6

    A lot of Golf's end up going putt putt.

  • AdosHouse on 27/04/2019 - 21:55

    I just had a look, and a $20k loan, with no monthly fees and 10% interest over 5 years is $98/week. Even 15% is only $109/week.

    How long were you looking at it over?

  • pegaxs on 27/04/2019 - 22:08
    +3

    The catch? It’s a VW and they can’t give them away? (Have at it VW fanboys)

    Either the “interest” is built into the base price of the car or there is a balloon payment or a “buy back” price at the end of the loan.

    Quite often, you can do a lot better with external finance and haggling on the price of the vehicle. Usually with these “low interest” finance packages, there is no play in the price of the car. You pay full retail.

    And another thing is, these “deals” are usually offered on slow moving model vehicles. Old stockers or poor selling models they need to move for new stock arriving.

  • SelfMade on 27/04/2019 - 22:46

    You won't be able to negotiate the price down too much…that's generally the catch with low interest car finance deals. Therefore you're actually loosing out as you're paying thousands of dollars more for the car. That's why dealerships love offering these eye catch low interest loans.

  • [Deactivated] on 28/04/2019 - 02:13
    -1

    Comparison rate is explained here https://www.moneysmart.gov.au/borrowing-and-credit/home-loan…

    A low comparison rate is a good thing but generally means you’re paying a higher ticket price as they’re discounting the car via the cheap loan already.

    Keep in mind current Golf Mk7 has been out since 2013, Mk8 probably out in 2020. If you can wait until then the discounting should be much sharper.

    Of the three you’ve listed the Mazda would be my pick. But 30k for a small hatchback is crazy (exception being hot hatches like GTI which are out of your price range). I’d check out Toyota Camry or Kia Sportage for that money, you’d get more of it back on resale and it’ll hold more stuff for road trips, family etc down the track too.

  • sonicentropy on 28/04/2019 - 07:16
    +1

    I bought our mk7 station wagon on their 1% deal over 2 years, because we bought a demonstrator we managed to negotiate 7k off the price. We opted for 0% balloon.the only drama I had back then was we could only get the golf, I was leaning towards the alltrack but test drive the golf suited my driving style.

  • Quantumcat on 28/04/2019 - 07:59

    Consider a Kia Cerato hatchback

  • Ocker on 28/04/2019 - 08:21

    Volkswagon should be able to raise funds in the wholesale market at a relatively small margin over the 3mth BBSW rate, which is currently just under 1.7% pa.
    So even at their comparison rate of 1.99%pa they would not be giving much away.

  • Bid Sniper on 28/04/2019 - 09:10

    Make it separate transactions.

    1. find a cheap car loan with lowest increase rate but known fine print. ie do you want to keep the car or keep constantly changing cars as in a novated lease (rent).
    2. find your own insurance
    3. find a ex demo car, will be considerably cheaper than a new car and is basically new.

    once you get numbers for 1 and 2, you'll get real numbers on how much you're paying and what your real budget is. I see a lot of repo cars with less than 10,000km at auctions for this reason!

  • afah0447 on 28/04/2019 - 11:44

    Don't get yourself locked into a car loan you will regret it. Cars are depreciating assets. Buy a cheaper car with CASH

  • p1 ama on 28/04/2019 - 13:08
    +1

    Sorry if this is an obvious answer, I'm 25 and this is my first new car (have driven the same second hand car since my learners 9 years ago), so I'm a bit new to the games the dealers play.

    Then you shouldn't be playing the game. I'm not out to say that dealers/salesmen are trying to trick you or take advantage of your lack of knowledge, but ultimately they are trying to sell you a car and they care about the bottom line. It's in your interest to either be knowledgeable about playing the game, or to avoid playing it at all.

    My advice is to get independent finance (if you would like to take out a loan), and negotiate the price of the car separately. Or better yet, maybe consider not getting a car loan at all and paying for the car with cash. Car loans are expensive and when you've got an asset decreasing in value, you're now losing money both to the depreciation and the interest. Your best bet is to try and go for a newish second-hand car that has low mileage and is the model that you want.

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