Better Car Financing Regulation Favors Australian Buyers

The last two months of 2018 is the best time to buy finance a car in Australia. With new regulation on Australian car financing introduced beginning November 1, 2018, potential new car owners can save thousands on their loan repayments.

Both new and used car financing will give potential buyers an advantage in terms of interest rates. Stricter rules and regulations in car financing will also help reduce kickbacks paid to dealers by some of the lenders in Australia.

Protection from Overpricing

Prior to the implementation of these stricter regulations, a car dealership can add a huge margin to the actual price of a lender to be able to gain a bigger kickback in successful transactions. In this scenario, a 5% actual interest rate on top of a car financed by a lender. A dealership, instead of giving the same 5% interest would sign up a customer to a 12% interest rate, thus kicking back more in interest rates with additional profit from the actual sale of the car itself. This usual system in car dealership reached its end after the new rulings implemented last November 1.

Inflation in car prices will no longer be an additional worry for Aussies who would want to purchase a vehicle. The good news for those who are interested in purchasing a new vehicle is that instead of the surcharge that dealerships include in a car purchase, what they can do on interest rates is to reduce the interest rate by a maximum of 2% or stick with the current interest rate that the lender implements.

Lower Interest Rates for Aussies

If a lender will assign an interest rate of 8% to a car loan, the car dealership has the discretion to stick with that interest rate or set it to 2% lower which is 6%. Again, the car dealership may decrease the interest rate by 2% maximum or stick to what the lender implements.

A commission is earned by the car dealership if they decide to keep the original quoted interest rate from the lender. As the interest goes down, the kickback that the car dealership gets decreases too. Car dealerships can still earn through the process by sticking with the quoted interest rate, but not as much as they used to do with the past restrictions and rules prior to the changes starting November 1.

Such changes provide a better chance for people in good credit standing to save a lot from car financing. On the downside, car loan applications might take longer for those people with bad credit score with these stricter rules being implemented.

Industry experts estimate that 80% of new vehicles are bought under a finance and most of these finances are arranged through a car dealership. Thus, we can expect a lot of Aussie clients to be very happy with the current new rules and restrictions, especially those with good credit.

How About Loans for People with Bad Credit?

However, good credit standing individuals are mostly the ones who will benefit the most with this new ruling. Bad credit car loans will still implement higher interest rates compared to regular car loans. Thus, getting help from a car loan specialist becomes essential. Each customer, whether with bad credit to worry about or with good credit standing, will enjoy a personalized interest rate. This will still be based on the risk profile of the client, but with the best interest rate possible with their current financial circumstance. If a specific loan is of very high interest, it would not be approved to protect the client, especially those with bad credit to worry about.

Need help with car financing? Call Intellichoice today- 1300 55 10 45.