24 January 2014
24 January 2014,
 3

On the back of an ambulance the other day as an add saying ‘come and join the most trusted profession’. It got me wondering, what is the least trusted profession.

I found this article on the SMH from early 2103 http://www.smh.com.au/business/the-most-trusted–and-the-least-20130502-2iusc.html

Would it surprise you to find out that car salesman are at the bottom of the list??? ie they are the least trusted profession? Maybe they are on par with politicians in a lot of cases, but on this list they were bottom.

Where I am going with this is when you are looking to buy your flash new you go see a car salesman (remember that least trusted person) and then most people then “trust” them to “look after” the finance for the car.

It is something I have never understood. Why trust them, or is just because it is easier for them to do it?

As Mortgage Broker & Credit Adviser I am now licensed* and have to a follow the rules ASIC set down around responsible lending and disclosure of commission.  Car dealers have no such rules to play by, they are not licensed in fact as I understand it, there is a special exclusion clause in the legislation to exclude them from having to be licenced.

The nature of this type of finance is that often the first offer is not always the best. When my clients talk to me about car finance I always get them to get a quote from the dealer so they have something to compare by.

You would be surprised how often their offer I too high.

I do ask people why they went with the car dealer for finance and they will often say “it was easier” Be aware that this convenience can cost you a lot of money.

Please, make sure you ask a licensed Finance Professional and get a second quote to compare.

Is 2.9% comparison rate finance too good to be true????

Now that you have got me started….. Have you ever read the small print when car dealers advertise a crazy low interest rate? Probably not, who does…

There is a certain Car dealer with a blue oval as their logo advertising 2.9% finance at the moment  – they all take turns with these “awesome” offers. Please stop and read the small print.

Here is the small print for the current offer.

  • “The 2.9% is a comparison rate for finance of $30,000 on Consumer Loan for 60 months (5 years)”

And then there is a warning

  • “this comparison rate is only true for the example given and may not include fees and charges, other loan amounts may result in a different comparison rate”
  • “it is only available at participating dealers on qualifying 2013 plate cars”
  • “must be approved and delivered by 31/1/14 unless withdrawn earlier”
  • “must have a minimum 10% deposit an Maximum term of 48 months (4 years)”

Think about that last point for a minute ….must have a 10% deposit – max term 4 years. How on earth can they quote a ‘comparison rate’ over 5 years – you cannot actually get 5 years…

Just be careful:

Things to be aware of

  1. Make sure you ask the dealer or their ‘finance manager’ to detail all the fees and charges in the finance so you understand.
  2. Get a 2nd quote from someone else, like me… J
  3. The finance is normally very selective or narrow, it is a promotion to get you in the door. Buying a car.
  4. They would prefer you do not fit the box – In the example above, you have to have a 10% deposit.
    1. What if you don’t have one or don’t want to have a 10% deposit
    2. Then you will pay their normal potentially uncompetitive rates
    3. Make sure you get a 2nd Quote….
    4. Sometimes the special offer is subject to you paying retail price for the car, ie discount on the finance, no discount on the car…..

 

Summary:

  • I am not saying they are being intentionally misleading, but certainly it is confusing. And I don’t really understand how they can do it.
  • Please be careful, read the small print, even get someone else to have a look at it before you sign on the dotted line.
  • But better than that, get a quote from a licensed Finance Professional so you can compare.
  • My hope is that this can help you make informed financial decisions.

 

Nb. *I actually operate as a credit representative (CRN 399 318) of BLSSA Pty Ltd (Australian Credit Licence No. 391 237). Under the licencing conditions you can hold a Licence of your own or choose to operate as a Credit Representative under someone else’s Credit Licence. In this case BLSSA hold the licence and I inturn operate under their rules as well as the ones set down by ASIC.

 

Cheers

David Johnson

The Home Loan Guy (and car finance guy too :))

3 responses on “Is 2.9% comparison rate finance too good to be true????

  1. M/s Wendy Anderson says:

    Hello David, I am looking to buy a new car.,Will need finance for $10.000 can you tell me how I can get the best loan please. Wendy

  2. abbas hussein says:

    Thanks David. This was really helpful in understanding the comparison rate as this was always confusing to me. I looked up comparison rates as I am planning to check out the Audi car with their current offer of financing the purchase at 2% comparison rate. I still do not know all the details of the finance offer but would know about it once I have visited their show rooms. Am I correct in assuming that the 2% would include the base interest rate plus annual fees. What I find hard to comprehend is whether the comparison rate needs to be added to the base interest rate. Thanks in advance.
    Abbas

    • Hello Abbas.
      Normally if they are quoting 2% comparison rate, if you read the fine print it will say “does not include all fees and charges”

      they are deliberately making this confusing… what you need to do is get them to give you a quote and make sure you understand these 4 things
      1. Loan amount
      2. Loan term
      3. is there a residual or balloon repayment? and if so exactly how much is it.
      4. monthly repayment

      if you know these things then you will be able to talk to a Accredited, Licensed and Professional Finance Broker (who will be independent to the sales man selling you the car…) ie like me 🙂 who has access to a number of Lenders and can then give you a comparison quote.

      you then have confidence and can proceed on the best finance offer for YOU

      I hope that helps, please let me know if you would like more detail.
      if you email me on david@noblefinancialservices.com.au I can be more responsive

      Cheers
      David

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