There are a range of options when it comes to vehicle finance, and a range of lenders including banks and finance companies, but you might be surprised to know that financing through a reputable motor vehicle dealer can actually save you money.   

How could a motor vehicle dealer compete with a large finance company? 

A reputable motor vehicle dealer will have competitive interest rates especially compared to other non-bank lenders, and in many instances they will also have lower fees. While most motor vehicle dealers often use the big finance companies to offer finance to their customers, they also need to be competitive. This means that the total finance cost can often be less through the dealer than borrowing from the same finance company directly.  

Dealers also have deals. On many new car brands, low interest rates are available either as special offers or part of their regular low pricing, and they may come with no deposit. These offers are only available through franchise motor vehicle dealerships.

It certainly pays to ask your motor vehicle dealer what their finance offer is for the vehicle you’re considering, so that you can make a comparison.  

What about the low bank mortgage rates? 

While the interest rate is lower, adding an amount for a motor vehicle to your mortgage may not be such a smart idea. 

Many of us have mortgages with 20 years to run. In this case, even at a rate of 5.35% interest on the average amount borrowed to buy a vehicle ($25,000), you would have a total repayment of $40,767. Whereas financing with a reputable motor vehicle dealer offering 9.95% interest for 3 years would make a total repayment of $29,429 – a difference of over $11,000. 

Only borrow what you need 

Another very important way to ensure you pay the least for your vehicle when financing is to borrow only the amount you need to purchase the vehicle, and no more. Often people get pre-approval for an amount which exceeds the cost of the vehicle, and end up borrowing and importantly, paying interest, on more than they need. 

Anything you can do to bring down the amount you need to finance is worthwhile, and of course having a trade-in will decrease that figure too. 

Specialists who work with you to save you money 

Reputable motor vehicle dealerships have Business Managers who are specialists in vehicle loans. It’s their job to find a finance solution that best suits the customer. A good Business Manager can also organise timing of the payments to suit you in a way that is not only more convenient but can save you money. Weekly payments for example will mean the vehicle could be paid off with less interest. People who add the vehicle to their mortgage may not consider weekly payments as an option. 

Furthermore, if you are expecting a lump sum payment e.g. a bonus or maturity of a term deposit, the Business Manager can help you factor this amount into the vehicle payments, once again resulting in paying off the vehicle sooner, and incurring less interest. 

Take your time and talk to the experts 

The best approach is to choose the vehicle you wish to buy, determine its price after any discounts and any trade-in you might have, then talk to the Business Manager at your trusted motor vehicle dealer about what they can offer you.  Alternatively, talk about getting pre-approval for a set amount, and then you’re free to decide on the vehicle. See what’s involved with a Credit Application.

Remember, cheaper rates may still mean you pay more, and big banks and finance companies aren’t always the most cost effective solution.  

Read more about different finance options.