Can someone explain car finance to me???

[jpd80]

Just save up and pay cash, that way you avoid finance altogether
Too many people grow up with the want it now pay later mentality.

When you pay cash, look at what you don't pay:
- no establishment fee ($300-$350)
- no dealer kick back fee ($500)
- no interest fees (can add nearly 40% to your repayment amount)
- no costly encumbered insurance (maybe $300-$500 more?)
- no compulsory CCI insurance in case you default ( maybe another $300)

On a $30,000 loan, someone could well be getting nailed for up to $15,000 in interst fees and admin charges

So instead of $625/mth over 48 months, you're paying $800 or $900/mth
It's no wonder people can't get ahead with their vehicles.....

When you pay cash, you can afford to run your car and save up for its replacement in a couple of years time....

[nstg8a]

Originally Posted by jpd80

Just save up and pay cash, that way you avoid finance altogether
Too many people grow up with the want it now pay later mentality.

When you pay cash, look at what you don't pay:
- no establishment fee ($300-$350)
- no dealer kick back fee ($500)
- no interest fees (can add nearly 40% to your repayment amount)
- no costly encumbered insurance (maybe $300-$500 more?)
- no compulsory CCI insurance in case you default ( maybe another $300)

On a $30,000 loan, someone could well be getting nailed for up to $15,000 in interst fees and admin charges

So instead of $625/mth over 48 months, you're paying $800 or $900/mth
It's no wonder people can't get ahead with their vehicles.....

When you pay cash, you can afford to run your car and save up for its replacement in a couple of years time....

in a perfect world id agree 100%. but not everyone can save a large amount for a car, either lack of will power (me lol) or a family to feed or low income or a combination of all three...
definitly not ideal, but finance can be a necessary evil.

[jpd80]

Originally Posted by nstg8a

in a perfect world id agree 100%. but not everyone can save a large amount for a car, either lack of will power (me lol) or a family to feed or low income or a combination of all three...
definitly not ideal, but finance can be a necessary evil.

Of course it's hard, worthwhile things always are...

I was once like you and it is hard to break out of but believe me
the sacrifice to do it is worth the reward on the other side.


If you borrow say $11,000 @ 14% over 36 months your total interest is around $3,000
but if you decide to pay off half the debt right away, you avoid 75% of the interest....
so paying $5500 saves you $2,100 or there abouts, I'd call that a bargain...

Grab hold of that philosophy and use it where ever you can, it doesn't have to be 50% either,
just doing the what if is enough to get you started, what if I got a lower interest rate,
don't make it ad hoc, have a plan, a system to pay down and get out debt asap.

[cjf]

Work hard save your money and pay cash for everything and you won't ever have a debt problem.

[No.6]

Why get a mortgage? You'd have to be financially incompetent to want to take out a 500k loan over 30 years!!

Finance is there because its needed by the majority. Not everyone can save up 40-60k for a brand new car. The key is to negotiate the interest rate to something u can live with. I paid 10k cadh and financed 27k on my 09 xrt when i bought it in june last year. I told them i would only sign the papers if they could drop the interest from 14% ( the standard rate) to 7.9%. And they did. They also paid the on road costs. Mind you, the negotiating lasted a few days.

[jpd80]

Originally Posted by No.6

Why get a mortgage? You'd have to be financially incompetent to want to take out a 500k loan over 30 years!!
.

No, you'd want a darned good income to keep the bank manager interested in your application...
I think it's 10% deposit minimum these days and on that loan you'd have to gross around $170K/year..

[jpd80]

Originally Posted by No.6

Why get a mortgage? You'd have to be financially incompetent to want to take out a 500k loan over 30 years!!

Finance is there because its needed by the majority. Not everyone can save up 40-60k for a brand new car. The key is to negotiate the interest rate to something u can live with. I paid 10k cadh and financed 27k on my 09 xrt when i bought it in june last year. I told them i would only sign the papers if they could drop the interest from 14% ( the standard rate) to 7.9%. And they did. They also paid the on road costs. Mind you, the negotiating lasted a few days.

Well done, you're not paying that much interest over the total loan but if you can
mange to pay another $7,000 off the top you will save yourself $2,000 in interest..

[nstg8a]

Originally Posted by cjf

Work hard save your money and pay cash for everything and you won't ever have a debt problem.

hence why i now work two full time jobs and am busting my *** to get ahead.

i did it back home so i could move over here, and now im doing it to be debt free again.

[XB GS 351 Coupe]

Originally Posted by nstg8a

in a perfect world id agree 100%. but not everyone can save a large amount for a car, either lack of will power (me lol) or a family to feed or low income or a combination of all three...
definitly not ideal, but finance can be a necessary evil.

If that is the case you can not afford the loan either!!!!

It seems the people that can afford a loan the least are the ones jumping into finance deals that will ruin them and put them behind in their finances

[nstg8a]

Originally Posted by XB GS 351 Coupe

If that is the case you can not afford the loan either!!!!

im not sure how you come to that conclusion?

if you can afford to either save $200 a week, or spend it on a financed car its still the same $200... its just the one financing it will spend a fair chunk more.

want it now, finance it, willing to save, wait until you have enough.


some seem to view finance has some great evil, when really its not, its only bad to those people that cant handle themselves and rack up far more than they can afford to pay back.

[jpd80]

Originally Posted by nstg8a

some seem to view finance has some great evil, when really its not, its only bad to those people that cant handle themselves and rack up far more than they can afford to pay back.

Which sadly, affects a lot of Aussie families...

No offense intended by me towards to you or your financial situation ...

[seduced_xr]

ive just taken out my first car loan. my BA was costing me $300 a week in repairs it had to go!.

im on a bankwest personal loan at 9.9% fixed, i pay $115 a week.

i found the car
signed the contract subject to bankwest finance
a week later finance was approved
showed car dealer insurance and handed them a cheque
havent looked back

[gtfpv]

blah blah blah .
lets assume someone has no car . what are thier transport costs in time , and public transport then .

[davocol]

A number of dealers are doing low rate finance at the moment, if you can get a car loan at 2.9 or 1.9% you would be an idiot to pay cash as you could earn more investing than money in an asset that is making money. Go for a deal like that or as mentioned get a basic low rate loan with someone like peoples choice credit union. There are no fees and there rate is about 8.4% from memory. Good Luck.

[jpd80]

The interest rate applies to full retail price, if you offer them cash, they knock quite a few grand off..

[Racecraft]

Originally Posted by jpd80

The interest rate applies to full retail price, if you offer them cash, they knock quite a few grand off..

Spot On.......

30k car + finance = $40k plus.

30k car + cash burning holes in your pocket = 25-27k

The super low interest rates are usually on 'fixed price' cars... They make up the margin by hitting you with the full retail price. Sometimes you'd save more by having a third party pre-approved amount at your disposal to haggle the purchase price than the lower interest rate with zero negotiating powers.

The other problem with dealer low rate finance is you pretty have to have the coin before you are eligible. Joe Blow with the 'capacity to repay' a normal loan can be knocked back on a 2% deal.

[davocol]

I disagree, I was deciding on whether to get a new car on cheap finance or a second hand car with cash in the middle of the year. Believe it or not I was looking at a Renault, the dealer could not care less whether I paid cash or paid via finance. The price was the same and the discount was massive either way. I am not sure what dealers you are going to but I have never had to declare how I was paying for the car before negotiating a price, this is not Harvey Norman.

[davocol]

By the way I went with the second hand Ford, I just could not force myself into a Renault no matter how good the deal was.

[SteveJH]

If you purchase a car under finance, say a personal loan through a bank, are there normally any penalties for paying it back quicker? Or do they not care as long as they get their money.

Havent looked into it up to that point, but at some point next year i'll have to. The car i'm driving at the moment has had a few annoying things wrong with it recently.

[HULK EF]

Originally Posted by SteveJH

If you purchase a car under finance, say a personal loan through a bank, are there normally any penalties for paying it back quicker? Or do they not care as long as they get their money.

Havent looked into it up to that point, but at some point next year i'll have to. The car i'm driving at the moment has had a few annoying things wrong with it recently.

i have a NAB Perosnal loan.. $25,000 initial borrow.. 3 years ago.. Its a 7 year loan.. i now owe $6600 on it.. and have been paying it down an extra $100 per week automatic debit drawing from my savings( 9 months now) onto the car loan EACH MONDAY.

There's NO penalty for an early payout. (in my situation anyhows)

[TheSneakiness]

Originally Posted by HULK EF

my repayments are $530 Per month

Geez I wish... mine is double that and add some.

And yes, I was one of those caught up in the negative gearing aspect (trading BA MkII XR6 on current) so advise everyone to make sure if you trade your vehicle in and you still owe money that you get whats owing on your loan as the trade in price at a minimum.

If I could refinance elsewhere (another big no-no with cars) I would, but would be a massive debt consolidation that contained all my debt.

[BA-XT]

I don’t want to start a rant, but I have first hand experience on this. We (my ex wife and I) purchased a 2003 BA for $16,000 in 2006. Basically right after we bought it, she became sick and I did my back in while starting my lawnmower, and was off for 3 weeks. We had no savings. Despite getting letters ect., we fell behind but luckily with help from family, made the payments back. However, eventually we broke up and the car was repossessed.
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These days it seems that everyone relies on Finance to purchase big ticket Items. Younger people especially seem not be happy enough driving around in 10-12 year old cars worth $3-5,000. They want new or near new cars worth $15-20,000.
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Having to make repayments every week for 5-7 years may seem ok at the start, but things change. You may lose your job, have a baby, fall sick, and all these things add up. Fall behind far enough and the car will be reposed and you’ll have to make up the short fall. Paid $25,000 for a BA XR6 Turbo 4 years ago, would probably be lucky to see it sell for anything more than $12,000 at auctions now. The falcon we paid $16,000 for was sold for $8,000 in January 2008.
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Plus the fact is that unless you buy a classic, your car will be worth at least 50% less than what you paid for it 5-7 years ago, not including the interest on top of the purchase price, late fees, account keeping fees ect.
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I now have another 2003 BA with less than 100,000km and love it. I paid $9,000 with new tyres and 13 months reg. The best part is that it’s mine outright, and bought it without finance. Maybe I’m growing up (or old!) but taking out a $15,000 loan on something like a car now just seems ridiculous. What happened to starting off with something you can afford (no matter how crappy) and then saving up for something newer if you must?
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My previous 2 cars were an 1974 FJ40 Land Cruiser, and most recently a 1985 Toyota Land Cruiser. I’m now 30. The only reason I bought the Falcon is because I owe nobody anything, I really, really wanted one, and the chances of us every affording a home (my wife works in childcare) in the next 10 years is remote. Otherwise I would have just kept the old girl.
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If I earned 80-$90,000 I might consider buying a newer car, unless I had one supplied.
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If I was in the industry I’m in now (Security), bought and kept an old banger in 2000 and saved up a deposit for a house in Dandenong / Cranbourne / Pakenham I’d be a very rich man and would probably be able to afford a nice BF GT or similar. But, young and dumb!
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[Mr Hardware]

Good post Mr BA2003, well said. Unbaised, real world experience that's not out of the ordinary.

I feel sorry for anyone who can't see that cars on finance just aren't worth it. I can see the allure - "i get the toys today and future me can worry about how to pay for it! wheeeee!"

i just simply regard that as a short-sighted, childlike view. Yes I understand some people are in situations in life where their only option is a loan, but the vast majority of people i see who get a loan for a car fall into the category of 'so full of their own self-importance that they can't drive a banger'.

[GT0132]

I've financed 3 cars now through mortgage re-draw. Currently owe nothing . Now while the politically correct among us will suggest that by redrawing from a mortgage you're effectively paying off a car over the life of a home loan (and that it is a sure road to ruin), many people park their savings in a mortgage offset account and simply re-draw for living expenses including major purchases. Just takes discipline

I'm wondering if we'll ever see 3 year interest free loans for cars in the future. Would certainly be a boost for the industry I'd imagine.

[SteveJH]

Originally Posted by GT0132

I'm wondering if we'll ever see 3 year interest free loans for cars in the future. Would certainly be a boost for the industry I'd imagine.

No such thing as interest free.

They add the expected interest assuming three years to pay back into the original price.

[Professor Farnsworth]

old, new, they'll both be crap heaps in 20 years, personal choice really. I've done finance on three cars. Personal loan for one, finance for the other two, drew on mortgage to pay the last one off, owe nothing now because i drive crap-heaps.

I find more joy now out of buying something with a little history to it, with cash and making it mine. Each to their own though.

OP: probably answered already as i skipped some posts, but work out if your loan has encumbered your car (means you must pay it off before selling) or if it was a personal loan, not secured against the asset of the car. Then work out what to do. Or, just pay it off over time, and keep it.

[gtfpv]

some facts . i dont now how many million cars there are in australia , but i do know that every one of them were sold brand new .
another fact . not many people have 15 to 300k sitting there to be withdrawn for a car purchase .
therefore , people buy them with finance new in a high majority of cases .
of course the wisest decisions are the 5 to 10k 2nd hand cars paid in cash .
everyone else loses money in depreciation .
therefore , most people have some equity in a car either in cash savings or trade , before they buy . .
people have to take out the costs of not having a car , for a potential purchase .
i guess in a cbd , and work in a cbd . perhaps you might be in front .
however , most will travel by bus train or cab, without a car . i would imagine not owning 1 car would cost me about 80-100$$ per week . sooo taking that away from a car running cost diminishes the real cost to some degree .
i would say most people redraw off a mortgage to buy high end cars , over 30k . . a good formula is to work out how much you owe on your home , how much your paying ,how many years it will take to pay off the mortgage, then borrow extra/or drawup the cost of the car and up the weekly payback to cover the cost , then add extra for your next purchase in say 5 to 10 years , so at the end of the day , you pay off your home in the origional planned time , /OR . buy 2nd hand lpg cars and pay off the home , either way , you will still be paying for public transport or a car in some form , and that will cost around $200 per week net at a minimum . houses go up that much .
so the rule of thumb says . i'm currently paying x amount p/wk on my home / i'll own it in 20 years, i want a new car, i'll add that to the mortgage. up the weekly payback,so the mortgage will still be paid in 20 years , but in 7 years ill want another car , so ill be topping the mortgage up again / the otions are to add the extra for that car now over 7 years , or increase the payments further in 7 years after you trade up agiain . so the house always gets paid off on the origional date .

[IDT]

Mr BA XRT. Getting your car financed is neither bad nor dumb.
BUT! be honest with yourself.
Afford does not mean buying two slices of white bread after your bills are paid. It means being able to save 10% of your income after all the bills are paid. Plus having two or three months wages sitting in the bank just in case. without effecting your lifestyle.
Buying a work vehicle (not a car you drive to work) is different, its an investment in potential/future income. It also has tax implications. so speak to a professional.

[drew`SEVNT5]

Originally Posted by jpd80

The interest rate applies to full retail price, if you offer them cash, they knock quite a few grand off..

Nope.

Got my car some $14k below RRP, and still got the cheap 4.9% rate.

Originally Posted by Mr Hardware

Good post Mr BA2003, well said. Unbaised, real world experience that's not out of the ordinary.

I feel sorry for anyone who can't see that cars on finance just aren't worth it. I can see the allure - "i get the toys today and future me can worry about how to pay for it! wheeeee!"

i just simply regard that as a short-sighted, childlike view. Yes I understand some people are in situations in life where their only option is a loan, but the vast majority of people i see who get a loan for a car fall into the category of 'so full of their own self-importance that they can't drive a banger'.

Bzzzt, nice assumption there.

Work pays me a set amount every month to go and buy a 'respectable' car as a part of my job.

Turning up to a customer to sell capital equipment in a flogged out EF-AU isn't going to cut the mustard, unfortunately.

(if it did, I would still be driving my old Alfas for work)

[mr302xd]

wow guys...lots to think about. Ive still got 1 year and a half left on my personal loan...which i was guna pay out and finance a new car...but soo many diffferent opinions and personal expeirences