We'll help get you on the road for less
Helping you get the car you need.
We appreciate that with so many different types of car loans available, choosing the right one can be difficult. At Loan Base, we’re happy to firstly work with you to help determine which option is best for you. We’ll then arrange quotes from our extensive panel of lenders, as well as help you apply and obtain approval with the most appropriate & competitive finance product available.
In some cases, it’s possible to save on the cost of both your car and reduce total income tax.
We will go through your situation with you and help answer key context sensitive questions regarding whether a car loan is right for you, what type of loan would be best, and how much you’d be able to borrow.
Whether the vehicle you have in mind is newer or older, used or unused, you’ll have access to our panel of over forty lenders, each with varying lending policies, allowing us to find the lender just right for your circumstance.
Whether the car will be for personal or for business use, we’ll be able to help you choose and tailor the loan so that it is just right for you.
Overview of Car Loans
There are multiple ways to finance the acquisition of a new car if you’d rather not pay upfront and out-of-pocket. At its simplest, borrowing to purchase a vehicle is largely similar to any other kind of borrowing – a lender will lend you a certain amount of money which you pay back with interest. This amount is secured by some asset, frequently (though not necessarily) the goods to be purchased – in this case, the car itself. There are other ways, or other arrangements, all of which will be outlined below:
These are simple financial products where the financer lends you the money directly. These can be either secured or unsecured, and in the case of the former would generally result in a lower interest rate. These are available over a range of loan terms, and the while interest rate does vary from lender to lender, factors such as credit history, amount borrowed, and whether or not the loan is secured will affect obtainable interest rate. You can learn more about these on our Personal Loans page, as they have general rather than specific utility.
A car loan is simply a loan that is secured by the vehicle being purchased. Generally, the same considerations apply as when seeking a personal loan or a home loan: credit history, amount sought and loan term will affect how much you can borrow and what the interest will be. As mentioned above, borrowing to purchase a vehicle is largely similar to any other kind of borrowing – a lender will lend you a certain amount of money which you pay back with interest. This amount is secured by some asset, frequently (though not necessarily) the goods to be purchased - in this case, the car itself.
Chattel mortgages are loan products used by businesses, for business related purposes. In such cases, businesses own the vehicle, termed the chattel, which is used as security over the mortgage. The principal from the repayments would not be tax deductible, however, the interest paid would be. Benefits of chattel mortgages include the flexibility of their loan terms (ranging from 1 to 5 years), options for balloon payments or fixed payments over the loan term, and the ability to add vehicle or loan protection. If the party making the purchase is a GST registered entity, then the purchase may be claimed as in input tax credit in their next BAS. However, it should be noted that chattel mortgages are not exclusive to GST registered businesses. They can be used by individuals or non-GST registered entities, so long as the primary use (≥50%) of the vehicle is business related.
Commercial hire purchase
Often abbreviated as CHPs, these loans are designed predominantly for business use. They are distinct from car loans and chattel mortgages insofar as the lender/financier owns the vehicle (used as security) and permits your use of it as you repay the lender as you would a normal loan. When all outstanding borrowed money has been repaid (including interest), then the possession of the asset passes to you. In effect, you hire the vehicle with intent to purchase. They further differ from chattel mortgages in that terms charges and loan fees are subject to GST, which is due and payable at the start of the contract. However, CHP agreements have recently dropped in popularity due changes relating to their GST treatment.
Novated leases are frequently considered to be one of the cost-effective ways for ordinary individuals to be able to purchase a car. It is a three-way agreement between the lender, the borrower (employee), and the borrower’s employer, where the employees sacrifice part of their gross (pre-tax) salary. The use of the vehicle does not have to be for business purposes, and your employer makes the payments as a payroll deduction. This is highly efficient, as some of that money would be otherwise spent paying income tax and thereby not accessible to you either way. It also reduces your taxable income, potentially putting you in a lower income bracket. The lessor (lender) holds title to the asset (the vehicle), the purchase of which they claim as an operational expenditure, subsequently claiming the GST as input tax credit. They effectively get the GST back and pass the saving into the borrower, who, in total, only has to borrow and pay back the ex-GST cost of the car. Moreover, there is little to no risk on the part of the employer since they don’t cover any of the costs – simply, part of the salary they’d pay you gets sent to the lender each month, and if the employee (borrower) leaves the business, the lease stays with them, not with the company.
An alternative type of novated lease is a Fully Maintained Novated Lease - which is the same as a normal novated please with the associated running costs added on, which are typically paid for via a credit card set up and associated with the loan, and whose costs are deducted from your salary. These costs may include those such as annual registration, CTP, fuel, roadside assistance, and any other associated costs.
However, it It should be noted that a novated lease is not as simple as purchasing a car from pre-tax income. Leased cars can give rise to Fringe Benefits Tax (FBT) liabilities. The payment of this liability falls on the employer, and is usually charged to the employee's after-tax payment package. This usually leads to the tax savings and post-tax pay deductions equalling each other out, however, in many where the FBT liabilities are less than the tax saved, borrowers can see a small but welcome tax-benefit, which may potentially even put them in a lower tax-band.
However, as potentially cost-effective and useful as novated leases might be, as with any financial liabilities you might take on, whether or not they are suitable for you is ultimately up to you and your financial situation, which we at Loan Base would be happy to review advise you on, and if all is well, set up your novated lease agreement.
Frequently Asked Questions
We go through a number of frequently asked questions about car loans below. If you have any further queries or would like assistance in organising a car loan, please get in touch for an obligation-free conversation about your needs.
How will I know if I can apply for a car loan?
A quick rundown of your income, normal expenses and liabilities will usually be enough for us to let you know if and how much you are capable of borrowing. Generally speaking, the lower your expenses, the higher your income, and the fewer your liabilities, the more the banks will be willing to lend.
What sort of interest rates will I be able to get for a car loan?
This is a tricky question as it changes from lender to lender and is context sensitive, and moreover some lenders might offer discounted rates or rate match. On the whole, however, car loan rates currently sit between 4% and 8%.
What if I am credit impaired, or have a bad credit history?
You might have been credit impaired for any of several reasons, including experiencing financial difficulty, missing a scheduled repayment and so forth. This needn’t be the end of the line, and there are a number of lenders on our panel who would be willing to lend for those with blemishes on their credit scores. Not all borrowers can have or continually maintain flawless credit ratings, so these lenders help serve a genuine market need, providing second chance for people other lenders might not work with. Bad Credit or Credit Impaired car loans usually have higher interest rates than regular loans, and higher associated fees. They may also require a greater security, such as a guarantor. These are because lenders will generally need a higher security to justify the perceived risk in lending you money.
Nevertheless, credit impaired car loans can be a second chance in a tight spot, so please do not hesitate in reaching out regarding them. To find more out about credit impairment, see our Credit Impaired page.
What is a balloon payment/residual value?
A balloon payment is an option or feature some loans have, where a lump sum, itself a portion of the overall loan, is payable to the lender after the final monthly repayment. The borrower effectively opts for reduced monthly repayments on his loan, but has a relatively large 'balloon' or 'residual' value attached to be paid at the end. This has the advantage of reduced financial burden over the loan-term due to the decreased monthly repayments, but the disadvantage and risk is the sum attached to the end, which may be due at an inopportune time.
What if I am self-employed? – Low Doc Car Loans
In cases where you are self employed, or have less documentation handy than a lender might typically need, Low Doc Car Loans are available for people to be able to borrow with more flexible income verification routes. Lenders will generally require at least two years of personal and business tax returns to support your application, however, some lenders will require less documentation provided some criteria are met.
Contact us today to discuss your finance needs.
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