1% car finance! - how reading between the lines could save you thousands

July 11, 2014
Jason Coviello

If you have ever seen a car dealer advertising car finance for 1% and thought that it was too good to be true, you just might be right.

view our detailed video that reveals how not to get caught out with your car finance

 

Real offer or marketing gimmick

The truth is that the offer of 1% finance is generally used as a carrot to get you through the door of the car dealership.

 

Once inside they have all sorts of tactics to make you feel like there is an urgency to purchase the car as soon as possible.  Once you feel like you have to make a decision there and then, and the car of your dreams is in-front of you, your brain stops thinking and the emotions take over.

 

We’ve all been there, when our head is telling us to take a step back and think, but out heart says, just go for it.

 

If you were thinking rationally you would say to yourself, “is this really the last black Hilux that Toyota are ever going to make?”  

 

Then the pressure would disappear and you could make sure you are getting the best deal on your car finance.

 

1% finance - It’s all in the fine print

 

Have you ever stopped long enough to read the fine print? If you had, here’s what you'd find:

 

  • The offer is only available on specific models – often not the one you’re after – and usually only on new cars.

 

  • The offer often doesn't include fees and charges - these will increase your monthly repayments.

 

  • The deal is based on a specific finance amount – usually less than what you need.

 

  • In some cases an initial deposit is factored in (10 – 30%) – and if you’re like most buyers, you don’t want to pay an initial deposit – that’s why you’re seeking finance.

 

  • Some deals may include a balloon payment – usually to make the deal more attractive.

 

  • The finance term may be based on a shorter term like 3 years - where most buyers want a 5 year term.

 

As you can hopefully now see, dealers are structuring their offers to attract a maximum number of buyers with offers that suit only a minimum of them.

 

So how do you protect yourself from these marketing gimmicks?   

 

First, be aware of them and do your research, and always read the fine print.   

 

Second, shop around for different car finance options.

 

Focus on repayments, not interest rates.

 

They are often misleading. Make sure to compare apples with apples. And, finally, if practical, organise a pre-approval early - before you start shopping.

 

Be prepared. Get into the driving seat   

 

Organise your finance independently from the dealer and you’ll find yourself in the driving seat when it comes to negotiating a better deal. Remember, dealers are in the business to make money. So if it’s not on the finance, it’ll be somewhere else. Often it is by bumping up the total cost of the car.   

 

Finally, like most people I deal with, you may not realise that as a Mortgage Choice broker, I have access to have access to a panel of car lenders and can give you a competitive quote on your car loan.

 

Car finance can be organised within hours   

 

Whether it is for a pre-approval before you’ve found your car - or a full approval if you’ve already found one - I can help you compare and contrast different options to make sure you get the car finance deal that best meets your needs.   

 

If you would like to find out more, or want to weigh up your car finance options, feel free to contact Peter Hale at peter.hale@mortgagechoice.com.au, or call 0402 252 150.  

 

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Posted in: Car loans & leasing

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