So, you’re in the market for car finance.
And you’ve been doing your research online (good old Google to the rescue!) – checking out the offers being promoted by the many different lenders.
And, I bet you’ve noticed a couple of common threads while doing this research:
1) EVERYBODY reckons they’re the cheapest!
2) EVERYBODY reckons they offer the best service!
3) EVERYBODY claims to care about you (more than your mother or father do, if you’re to believe some of them)!
4) Some of them love to crow about “As seen on 7’s Today Tonight” (as if that’s any true indicator of a great loan!)
5) And some of them “Say Yes more often” … apparently!
6) Lastly, there’s a heap of offers for super-low rate car finance (particular cars @ 0%, 1.9%, 2.9%, etc.)
So, how on earth do you actually make sense of this?
Obviously they can’t ALL be the cheapest, offer the best service, care more about you than the others and so forth…
At the end of the day, most of these wild promises are just lies & marketing hype, designed to confuse buyers from digging a little deeper into what’s being said, and what’s on offer.
For example, the super-low rate car finance offer is an absolutely classic furfy!
Yes, they ARE offering a super-low rate – no argument there.
HOWEVER, what you don’t get told up front is that the reason the rate is so low is that the car manufacturer/dealer is not reducing their prices much – if any – below the normal RRP. In other words, they usually won’t bargain on the price (which is unusual in the car industry) *IF* you want to take advantage of those super-low interest rate offer.
And, in those cases where there does appear to be a genuine (non-RRP) discount, they will make that lost profit back by offering you less on your trade-in & slugging you full price on all optional extras (tint + paint protection + floor mats @ $1000 – $1500 anybody?!)
If you just take 30 seconds to examine the FACTS, you’ll quickly find it doesn’t add up.
Ex: A fairly typical $30K family car @ 10.99% interest over 4 years would cost YOU approx $7,210 in interest. If you get that same car for 1% interest, it would only cost YOU $616 in interest. Do you REALLY think the manufacturer is giving away $6,594 ($7210 – $616) for nothing??? Especially when they probably have to pay a decent chunk of that money to the actual finance company as their cost of offering these kinds of deals
Remember, money isn’t free! EVERYBODY ends up paying the actual lender a fee for borrowing the funds, even the car manufacturers.
Do you seriously think the car manufacturers would forego the THOUSANDS of dollars in car loan commissions they earn when they provide super-low interest rate car finance to you, just out of the kindness of their hearts?
Obviously they’re making that money back somewhere else (higher priced cars &/or a lower offer on your trade-in, etc.)
You can read about this finance marketing tactic on The Age ‘Drive’ website.
At the end of the day, these amazingly low car finance rates are just a marketing tool to get you into the dealership (which is the hardest part of their job), where the sales person will bring their considerable sales skills to bear against your (limited) experience in buying cars. If you decide you don’t want to take up the special finance offer, they’ll just sell you hard on normal (full priced!) finance and possibly be willing to discount the car.
Do you really get a good deal in these situations? It’s hard to say, but my guess would be that most people don’t, simply because they don’t really understand how it all works, and ‘have’ to believe everything the car sales person is telling them.