Car Broker Loans

Is there a difference between a Car Loan and a Personal Loan?

Whether you are out to buy a car or just curious, have you ever wondered about differences between a Car Loan and a Personal Loan? When you read about Personal Loan, they usually claim to be “for any purpose”. So why does one need a car loan?

What Are The Main Differences?

Car Loan Personal Loan
Restrictions Must be spent on car purchase For any reason (incl. buying a car)
Security/Collateral Required Secured against your car Secured or Unsecured
Credit Rating Medium/Bad Credit will suffice Usually required good credit
Buying new or used car Mostly for new cars Mostly for used cars
Amount borrowed Covers only the car value Borrow any amount
Interests Rates More competitive (car as security) Tend to be higher

Car or Personal Loan

Where can you get a Vehicle Finance vs. Personal Loan?

You can get both Vehicle Loan and Personal Loan from any financial institution like banks or other lenders. In addition to that, Vehicle Finance are also offered by car dealerships. So you can directly finance your car from the dealership you but it from.

How much can you borrow for a car?

In most cases, you can borrow up to 100% of the value of your car as part of your auto finance. Since your car will be used as a security for your loan, deposit is not required. However, it is always a good idea to have 20% deposit, if your financial situation allows for it.

So now that you know the basics, how do you choose?

The answer depends on your personal and financial situation.

  • If you are purchasing a secondhand car, it will usually be cheaper. However, it is better to get a personal loan to fund a secondhand car, because lenders may not want to fund an older car.
  • If you have bad credit, you are more likely to get approved for a car loan because technically you do not fully own your car until the final payment. So, if you default on your payments, the lender can repossess your car to recover any leftover debt.
  • If you are planning to do any enhancements or modifications on the car, a personal loan may cover the cost of the vehicle as well as the modifications, compared to a car loan.

What’s the bottom line?

Buying a car (or anything for that matter) is stressful enough. So, leave the sorting out of the finances to the experts. At cash.com.au we have a team of expert brokers that will guide you through the minefield of borrowing and will find you the best solution to suit your individual requirement.

Applying for a loan with cash.com.au is also simple, 100% online and FREE, so Apply Now and being in the experts.

Car Loans Made Easy

Everything You Need To Know About Guaranteed Future Value

So, you’ve found your dream car and the dealer offers you a way to guarantee the future value of your car. On paper, it sounds like a great idea. I mean, who doesn’t want to slow the process of depreciation? But, before you sign the dotted line to opt into Guaranteed Future Value, make sure you are aware of what it entails.

Understanding Guaranteed Future Value (GFV)

You can find loads of resources detailing what Guaranteed Future Value is, but essentially, it is a sales tactic that tries to manage your fear of depreciation when buying a new car, especially when your finance contract has a balloon payment (i.e. a large final repayment at the end of the finance contract).

When a Guaranteed Future Value contract is made, the dealer will offer a minimum trade-in value, provided that certain conditions are met. These may include:

  • Maximum kilometres on the vehicle
  • Wear and tear
  • Residual amount owing on the loan

How does it work?

Guaranteed Value Financing is an alternative to traditional purchase financing or leasing. You can use this option to take advantage of a lower monthly payment.

You purchase the vehicle and finance it using a Guaranteed Value Financing contract. The term of your finance contract is 60 months (5 years) but it is amortized over 84 months (7 years). This allows you to have a lower monthly payment. Your payment schedule is structured using a consecutive monthly payment for the 60 months (5 years) and a balloon payment at the end of your contract (which is the amount remaining on the loan). At the end of the contract term, you have 3 options for paying the balloon payment.

  • Refinance the outstanding balance
  • Purchase the vehicle by paying the outstanding balance
  • Trade the vehicle in towards the lease or purchase of a new vehicle

Who is this really benefiting?

Mainly, Guaranteed Future Value puts the dealership in the driver seat [pun intended]. When you are getting ready to sell your car, it “forces” you back to the dealership to get best resale price, giving you less choice. If you choose not to trade-in, you will be stuck with a significant balance left to pay out your loan.

What do you really need to know?

Like any important decisions in your life, take the time to review all your options before you sign up for Guaranteed Future Value. This may include being aware of the following:

  • It will shrink your market when you are ready to sell this car.
  • If you are on balloon finance and opt to sell it through another dealership, you might end up needing additional funds to assist with negative equity, due to the size of your balloon payment being more than the market value of your car at the time.
  • Often you are tied to using the dealership’s workshop for ongoing maintenance of the car.
  • Usually Guaranteed Future Value will come with an expiry date (sunset clause). This means the offer is only valid until a certain date, forcing you to upgrade earlier.

To understand depreciation of cars over time, a good independent resource is Red Book. This can help you negotiate realistic balloon payments on your finance.

This is where having an experienced finance broker can help you access a variety of tailored finance options. So, if you are in the market for a new set of wheels, or upgrading your current ones, contact our team at cash.com.au today. Our application process is 100% online and comes FREE of any obligations.

Cash.com.au Broker Advice

3 Reasons You Should Use A Broker

  1. We understand finance companies
    A lot of people think it’s cheaper and quicker to apply for funding directly through a finance company or bank.  However, unless you have spent years researching each and every available option, the chances of getting the best deal for yourself are pretty slim.  It’s worth knowing that different finance companies have different risk appetites and risk silos they like to operate in. For example, certain commercial finance companies will not lend over a certain amount to companies associated with the construction industry.
    Now they won’t ever advertise this or make it public knowledge, but its important information to know if attempting to borrow money from them.
  2. It’s the best use of your time
    By using a broker you only have one point of contact. Often we hear from clients who have had to tell their story and supply their documents to two or three different people within the same finance company,  only to have their application declined.  They then go away and start the process with another finance company. This can be time-consuming and frustrating.   By using a broker, you supply the information once  and they will handle the various departments across the finance companies they are dealing with.  As an added bonus the broker also knows exactly what information the finance company wants to see, so they can package and present the loan to the finance company to get the most favorable outcome for their client with the least amount of stress.
  3. Cost, cost, cost
    When we borrow money we want to do it as cheaply as we can.  A lot of people think adding an extra person in the process of acquiring a loan may stop them from getting the very best available deal.  However, by using a good broker the complete opposite is true.  Often finance companies advertise on rate and rate alone, for example, “get a loan today for 5.9%” now off the bat this may seem like an attractive offer, but is that an advertised rate or a comparison rate?
    What are the establishment fees involved?
    Are their certain criteria you need to meet to qualify for that rate?
    Are their monthly fees charged in relation to the loan?
    What term is required to secure this favorable rate?

    By working with a broker, you can map out different loan scenarios using different lenders and ensure you are getting the best deal for your current situation.

Apply for finance today.
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For more details and other reasons you should be using a broker, read this interesting article.