Car loan refinancing case studies

When buying a new car, it's easy to get caught up in the excitement and simply accept the finance solution available through the dealership. However, you could save money by shopping around, like the Mortgage Choice customers below.

Terry saved over $36,000

In 2014 Terry decided to upgrade his car, and purchased a 2011 HSV Clubsport E Series 3 Sedan for $46,999 through a local dealership. He also opted to arrange his finance through the same dealership as this seemed like the easiest option. Terry was offered a loan of $82,043 over a 7 year term, which included the loan balance owing on his previous car.

Based on the rate he was paying, along with insurance and fees, he was looking at paying back $126,259 over the life of the loan – just under 3 times the car’s advertised value! 

Terry’s mortgage broker and friend, Damian Brouwers, saw on Facebook that Terry had purchased a new car. He decided to contact Terry to review the finance to see if he could get him a better deal.

After a quick review of the finance, Damian identified that he could secure a lower rate with a lender on the Mortgage Choice panel, as well as picking up on the fact that Terry had been sold insurances by the dealership that were not suitable.

When asked if the dealership explained the costs involved with the loan, Terry said that the paperwork was skimmed over quickly. “If it had been explained properly there is no way I would have gone ahead with it!” he said.

Damian recommended that Terry look at refinancing the loan. Damian was able to prepare a new loan of $70,938, reduce the loan term to 5 years and remove the unnecessary insurance.
By signing up to the loan recommended by Damian, Terry’s total repayments over the life of the loan will drop to $90,224 – saving him over $36,000!

Terry said of the service provided by Damian, “My Mortgage Choice broker Damian Brouwers was absolutely brilliant, he was at all times professional and upfront. I am more than happy to recommend him to anyone!”

Brenton saved over $20,000

Brenton purchased a 2011 Ford Territory TX Wagon for $38,021 through a dealership in May 2013. He arranged finance for the car through the same dealership, and was offered a loan of $54,057 over a seven-year term. Based on the rate he was paying, along with insurance and fees, he was looking at paying back $74,463 over the life of the loan, with monthly repayments of $886.

In August, he called Scott Bament at Mortgage Choice Morphett Vale, SA, to find out if he could get a better deal.

The first thing Scott did was review Brenton’s existing contract to see if there was any potential to reduce the total repayments. He was able to see some key areas to change – mainly the rate, but also the amount of insurance included.

As a result of the review, Scott recommended that Brenton look at refinancing the loan. Scott was able to prepare a new loan of $41,847, reduce the loan term to five years, remove the unnecessary insurance and decrease the monthly repayments to $843 – saving Brenton over $40 per month. Also, under the terms of the new loan, if Brenton wanted to pay more than his monthly repayment amount, in order to pay off his loan faster, he would not be penalised. By signing up to the loan recommended by Scott, Brenton’s total repayments have dropped to $50,551 - a huge saving of $23,912.

Not bad at all for a 30c phone call!

 

Note: All figures have been rounded to the nearest dollar. Image is for illustrative purposes only.

Top tips to consider

Don’t just look at the interest rate when choosing your car loan

Low rate loans may seem great on paper, but could include hidden fees and charges that can really add up over time

Consider loans that let you pay extra on top of your monthly repayments

This is a great way of reducing the overall cost of the loan, but not all lenders will allow you to do this, and some of them will change you extra fees for early repayment

Consider total costs

Make sure you consider the total cost of the loan over time, not just the monthly repayment

Read the fine print

Make sure you read the fine print of your loan agreement so you really understand any additional fees and charges and how they will impact your total repayments

See if you could save

Talk to Mortgage Choice today to see if you could get a better deal on your car loan.

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