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Most car dealers now provide car loans at the time of purchase, and this is where they make a significant portion of their money. While it might seem convenient to handle everything at once, proceed with caution when considering car yard finance.

Limited Options and Potential Overcharges

  • Limited Financial Providers: Most car dealerships are partnered with one or two financial providers, limiting your options and potentially not offering the best deal, features, or benefits for your money.
  • Higher Overall Costs: Depending on the car dealership and the loan they offer, you might be paying more overall. Instead of just paying interest on the car, you could be bundling the cost of the car, registration, insurance, extended warranty, UV protection, scotch guard, and other fees—paying interest on the combined total.

Low or No Interest Deals

  • Disguised Price Rises: Low interest rate or no interest car yard deals are reappearing as car companies attempt to disguise price increases driven by a weaker Aussie Dollar or to mask heavy discounting on slow-selling models.

Evaluating the Deal

  • Dealer Financing: It can be confusing for car buyers to determine if it is a good deal or not. In many cases, it can be better to negotiate a sharp price and arrange your own finance outside the dealership.

We did some number crunching on one deal:

  • 0% Finance Offer: One leading brand offered 0% finance on a high retail price of $24,990 drive-away for a small car that recently sold for $19,990 drive-away.
    • At 0% finance over five years, the $24,990 price would cost $417 per month, assuming no hidden charges or establishment fees.
  • Self-Arranged Finance: Buying the car at $19,990 drive-away and arranging your own finance at a rate of 5% (assuming good credit history) would cost:
    • $378 per month over five years, paying $2,690 in interest, bringing the total cost to $22,680.

Tips for Car Yard Finance

  • Get Multiple Quotes: Always get more than one quote to compare total interest and the total amount repayable over the loan term.
  • Beware of Dealer Profits: Dealers often make more profit on financing than on the sale of the car itself, which is why many buyers are directed to the dealer’s in-house finance guy.
  • Evaluate Monthly Repayments: Don’t just focus on the monthly repayment figure. Finance managers can make this figure look small by stretching the repayment terms, meaning you pay more interest for longer. The longer the repayment period, the higher the chance the payout figure will exceed the car’s value at trade-in time.

Make sure you find out the total interest and the total amount you will repay over the life of the loan. For personalized advice on car yard finance and to get the finance you deserve (even if you have bad credit), call Truck Insurance HQ on 1300 815 344 or use the enquiry link on our website at Truck Insurance HQ.


Disclaimer: The comments on this form are a guide and for general advice only and should not be relied upon as specific advice for your current financial situation. Please speak with a professional Credit Advisor, Accountant, or Financial Planner to ensure you get the right advice specific to your personal circumstances. Truck Insurance HQ holds a National Credit Licence (392611), and our credit advisors are members of MFAA, FBAA, and CIO.