Note: We do not directly provide you with Car Finance. Following Australian law, we will redirect your details to our third-party partners since only licensed lenders can perform those two functions. We recommend them and their services, and we hope you understand our situation. Please, and thank you.
Loans and Leases
A car loan is a loan for cars. You borrow money from a lender, and in return, you pay them back with an extra charge called interest. This type of payment is helpful for vehicular purchases since even the unluxurious and non-flashy can rack up quite the bill.
Loans are often a tricky, intentionally obfuscated web, and in some circles, they have a bad rap. But with due diligence and understand the defined payment plan, with the exact fee, or how often the instalments (the times you pay) are, and the term or how long you have to pay it all back. We recommend you do some sleuthing by yourself, but you can trust the people we trust in this area.
We recommend you pre-approve your loans before buying a car. Not only does it smooth the process out, having a fixed amount you can spend, but it can also safeguard you from a minor or a not-so-minor markup.
Here are six golden rules for searching for a good loan or anything finance-y, but remember that having a trusted financial advisor is critical for having stability and peace of mind.
- Number one: always be honest with your situation. Evaluate your financial situation, whether it is scary or not. Captains who do not accept what is in front of them seldom miss the iceberg.
- Number two: always ask or investigate if you are unsure. A second opinion rarely goes wrong; it may do if you are getting a sixth, seventh, or nineteenth opinion too many.
- Number three: keep an eye on your credit score and keep it healthy. The credit score is an objective measure that lets lenders know how risky the borrower is, i.e., they will see whether you will pay on time or at all. Having a high credit score unlocks larger loans and a more pleasant experience.
- Number four: keep the loan terms short and concise. The longer a loan is, the more a lender can accrue in interest, which means you have to pay more.
- Number five: try to pay as much of the loan upfront in a deposit. The more of the loan you pay for upfront, the shorter the loan, the closer you are to closing it up, and you would be giving up a lot less cash in the long run.
- Number six: ask, or read, or otherwise find out if they have any other discounts, and if you would or could be qualified for them. For example, the world is edging towards green and renewable energy and products, which may mean the loan lenders may be offering a discount for such vehicles.
Number seven: following the idea of loan five, try to make balloon payments. These are one-off lump sums you can make each loan term that can take away a significant portion of the loan amount. Meaning you have to pay less in interest and repayments during the next period, and you will have a healthier cash flow.
A new lease on wheels
You should also be aware of many different species of a lease when thinking about getting one; some may work ideally with your situation. Please contact us and fill in the form to discuss any of these things in further detail.
These are your stereotypical car loan arrangements. When you, the potential borrower, want to own your car wholly and use it in whatever way you want.
The borrower has ownership as soon as their first payment and has wholly-owned it after the lender’s loan has been fully repaid. Both parties agree to modify the arrangement to whatever suits them, allowing balloon payments, extending the instalments from weeks to fortnights to months, or the entire term length as well.
A chattel mortgage is semi self-explanatory. Companies and business professionals use this to buy goods they need to run their operation, like SUVs, delivery trucks, professional lab equipment, etc.
The borrowers maintain full ownership, and the lender achieves a loan via a mortgage on the vehicle or equivalent item. At least half the usage of these autos must be for business purposes.
Companies and businesses also use this to buy goods they need to run their operation. However, this type of contract differs from a loan in a significant way, the state of the car matters. The car’s depreciation due to usage informs the fee structure, which is usually systematic.
The borrower can obtain the car, truck, motorcycle, etc., permanently at the end of the lease cycle, or you can return it, take out a new lease for it. If they intend to resell, the borrower has to pay the difference in expected versus actual return.
An operating lease is where you borrow something to use in exchange for money. Sounds a bit like rent? That is because it is just that.
Unlike the financial lease above, the lender retains ownership at the end of the lease cycle. The fee structure is rigid and systematic, but the borrower is not responsible for dealing with the vehicle afterwards.
Novated Leases and Salary Packaging
Now, for a delectable innovation that plays into government allowed and approved for legislative loopholes – if such a thing is possible.
A novated lease is a type of contract where you take out a car and lease it to your employers in exchange for your salary, like superannuation but an automobile and not your pension.
Your employer pays for all things related to your car, from payments to the lease, fuel, insurance, depreciation, etc. In exchange, you reduce your salary by an agreed-upon proportion.
Now, you would be ridding yourself of an expense, but you would be losing out on an income. Your first question may be: why? What benefit would it have for me, or my employer for that matter, to go through all these hurdles? That is where tax comes in, or more accurately: tax policy.
Australians like Scandinavians, the Nordics, etc., are some of the most taxed people on the planet. Most of the government’s tax revenue comes from income tax, which takes a slice of your annual salary every year. So the salary your employer gives you is not exactly the amount you will keep for buying a house, food and drink, or a car.
This situation is where novating a lease comes in to save the day and your hard-earned cash. Your employer still pays income tax – but for their and not your income. He or she, or a collective they, experience your salary as an expense, so it does not fall under the hefty income tax. Instead, a smaller one where the details differ on a state-by-state basis, called the payroll tax, is in effect.
Using this, we avoid other taxes like the Goods and Services Tax (GST) of %10; you might also be able to pair it with Instant Asset Write-off if the car is mainly for business.
So, they can reduce their costs by paying you less but taking on your expenses. This salary packaging arrangement also means you have fewer outflows of money since the salary you would have gotten would have been taxed, but this type of Australian Tax Office (ATO) approved scheme is not.
But how does one start a novated lease for a set of wheels, and how can we help you save even more money?
To start one, you generally have to get a lease for it. After that, you head to your employer and ‘novate’ the lease, so while you remain the registered owner and the one who uses it, you are neither paying nor having to reach any financial deadlines for the car.
Since the contract is still in your name, it will still be yours if you leave the company, and you can novate it once more in however many company positions it takes to pay the lease off.
While we cannot directly help you with loans, insurance, or anything like that, we can help you with step zero: picking the right car.
Every expert has their expertise, and ours is in brokering and assessing automobiles. We have had many instances where we saved people and businesses a lot of money by simply getting them a reliable car at the lowest price possible. Even if you get the cream of the crop in loan lending, we can still offer better advice and services for our line of work.
So if you are thinking of salary packaging a car, let us know, and we will help you pick the right one, and we will even forward your details to our third-party partners that we recommend dealing with for your car finance wants and needs.