Considering buying a new car from a dealer? Then one of the first things to consider is how to pay for your car.
There are many ways to finance a car in Australia these days. Some buyers opt for personal loans, others buy with credit cards, and some even borrow money from friends and family. However, the best way to finance a car in Australia is through a car dealer.
What is Dealer Financing?
If you choose to buy your vehicle from a dealership, you can usually finance the vehicle through the dealership rather than taking out a car loan elsewhere. This payment method is called merchant financing.
As with any other loan, the loan process begins with a discussion of how much you can afford each month and a review of your credit history, income and savings. The dealer will then contact their preferred bank and arrange a car loan for you. In most cases, the dealer is responsible for all aspects of the loan, not the bank.
Dealer financing does all the work for you to get a loan to pay for your new car. Even better, auto dealer loans typically have lower interest rates and monthly payments than other personal loans.
Advantages of Auto Financing Through a Dealer
Financing your vehicle through a dealership offers many advantages over a personal loan. Here are some of the key benefits of dealer financing:
Simple
First, you’ll need to contact your bank or credit union and fill out a lengthy application. After a few days of processing, the financial institution will make a decision on your loan. If the bank rejects your application, you will have to start the process all over again.
Financing your vehicle through a dealer is an easier and less stressful process. The dealer handles all loan applications and processing for you. All you have to do is agree to the loan terms and drive your vehicle.
Lower interest rate
Dealer loans typically have lower vehicle financing rates and looser credit terms than other financing sources. In fact, it’s not uncommon to find dealer loans with interest rates below 1%. With these cheap dealer loans, you can save a lot of money in the long run.
Low monthly payment
Lower payments are another benefit of low interest rates, but that’s not the only reason you typically pay less each month with a merchant loan. Many dealers use a “balloon payment method,” where borrowers make a lump sum payment at the end of the loan period.
Balloon loan payments keep your monthly costs low throughout the financing period. At the end of this period, you also have the option to sell your vehicle and buy a new one, avoiding balloon payments altogether.
Flexibility
Most car dealers do not want you to drive away, so they do everything they can to keep financing costs as low as possible. Financing your car through a dealership allows you to negotiate loan terms and generally get more generous financing offers than personal lenders.
Speed
When you’re planning to buy a new car, you may want to be able to drive your car right away, rather than waiting days or weeks for a loan application to be processed. Dealer financing options are often faster than financing through a bank or credit union. In many cases, you can test drive a car, buy a car, sign a dealership loan and drive away in one visit.
If this article helped you, consider going back and reading the other article that teaches the best ways to finance a car in australia.