Where to go for a car loan: broker, direct or car dealer?
A deal is a deal, business is business, but is a car loan the same as any other car loan? When it comes to car finance, there are several different places to shop, but it can be hard to know the difference. To get the right deal, it’s important to know where to go. Before you go signing finance with a car dealer, it’s best to know your options – and where to go for the best rates.
There are plenty of direct dealer options available for car loans. While one is sure to have a good deal for you, it’s very difficult to know which is right without making hundreds of applications all over town.
It might be convenient, since you can sign all your vehicle and finance documents at once, but car finance through a dealer might not get you the best deal. Dealers generally work exclusively with one lender, meaning limited options to find the best finance for you.. Car dealers generally have incentives with lenders, so it’s in their interest for you to take up finance through them. Flex commissions, when lenders allow car dealers to charge higher interest rates on top of base car loans and pocket the difference, have been banned in Australia but still happen in New Zealand.
Digital brokers (like the Lending People) work by using specialist technology to access a range of lenders for your loan. Which means you complete one online application, and your profile is matched to a lender to get you the best rate. It will also give you the best chance of approval, since lenders have different lending criteria.
You’ll be able to secure the same rates as going direct to a lender, although a broker fee does apply for the service of matching lenders and helping you through your options.
Extending the mortgage
It’s sometimes possible to extend your mortgage to finance a new car. Mortgages generally have low interest rates, so it’s easy to think you’re getting a good deal. However it’s important to calculate the total cost, as mortgage loans are often over a long period of time. A $10,000 loan at an interest rate of 3% over 25 years is going to end up costing over $14,000. To compare, a $10,000 loan at an interest rate of 18% over 2 years is going to end up costing $11,942.