What is a car finance broker?
Car finance brokers are car loan experts, who can use this expertise to help connect Australians buying cars with banks and lenders offering car loan options. Similar to mortgage brokers, car loan brokers can help match you with a vehicle finance option that suits your financial needs, and can help your achieve your car purchase goals, whether you're buying a new car or a used car, privately or from a car dealership.
How can a car loan broker help me?
Car loan brokers are professionals who deal with vehicle loan applications every day. If you’re applying for your first car loan, or otherwise aren’t familiar with Australia's vehicle finance industry, a broker’s knowledge and experience could help you compare car loans, calculate your loan amount and monthly repayments, and find the best car loan for you. These could include options such as a car loan with a balloon payment or a chattel mortgage, all with competitive rates.
A car loan broker can also take care of managing the loan application process for you, including negotiating with lenders. A professional broker is likely to have the industry knowledge and skills to deal with multiple lenders effectively. And by getting you set up with pre-approval for your car loan, you can shop for vehicles with confidence.
Another potential benefit of a car loan broker is that they can provide advice to help with your loan application if you’re in a tricky financial situation. For example, if you’re self-employed, have a bad credit score, or want to bring a guarantor onboard, it may be difficult to secure car loan approval on your own. You can expect an experienced car loan broker to have relationships with lenders that are more likely to approve loans to borrowers in your situation.
Can a broker get you a better deal on a car loan?
While it’s not guaranteed that a broker will secure you the best car loan, chances are you may bag a better deal.
Aside from the fact that car loan brokers have established relationships with a range of lenders, many car loan brokers have access to lenders’ wholesale interest rates that generally aren’t offered directly to borrowers. Wholesale rates are usually lower than the retail rates you’d potentially be offered if you approached a bank.
A car loan broker may also help secure you a better deal than going directly to a lender. Rather than just looking at one lender’s car loan polices and rates, a broker could help you compare options from a wider cross-section of the vehicle finance market, and help you identify the right car finance choice for you.
That said, it’s still important for you to do your own research and compare the car loan options a broker puts in front of you. While a broker can’t recommend a car loan product that’s unsuitable for you or that could put you into financial hardship, you still need to understand the fees, features and interest rates of any prospective car loan you’re comparing. It may even be worth considering weighing up car loan options other than the ones recommended by the broker for a more comprehensive comparison.
Consider looking at each loan’s:
- Interest rate;
- Terms and conditions;
- Upfront and ongoing fees;
- Loan term, and;
- Eligibility criteria.
Lenders may regularly change the details of their car loan deals. If you don’t have time to educate yourself on all the vehicle loan options out there, using a car loan broker may save you significant time and hassle.
Who pays a car finance broker?
While it’s often free to visit mortgage brokers, who are paid commissions by lenders for successfully signing up customers, car finance brokers may be paid differently.
Some car loan brokers charge fees for their services, either directly to the car buyer, or to the car finance providers and/or car dealer. Sometimes a broker’s fees to a car dealer or lender end up added onto the cost of the car loan, so the buyer may end up indirectly paying the broker after all.
Consider asking a car finance broker about their fee structure and how they’re paid before engaging their services, to make sure you don’t find yourself having to manage unexpected extra costs later on.
Benefits
- Often have access to wholesale interest rates.
- Able to quickly compare multiple banks and non-bank car loan lenders.
- You can usually just deal with one broker throughout the entire application journey.
- Can be more efficient than comparing lenders and car loans by yourself.
Drawbacks
- Can be more convenient to deal directly with your existing bank.
- May give priority to the lenders they have pre-existing relationships with or offer the highest commission.
- Car loan brokers do not have access to every single lender and car loan on the market.
- May sometimes charge a broker service fee or commission or both.
Where can you find a car loan broker?
Like mortgage brokers, car loan brokers may operate as part of large brokerage firms or franchises, or in smaller family-run businesses.
These days, most car loan brokers can be found and accessed online. Chances are you may even be able to complete forms and paperwork digitally.
You may also find a car loan broker on comparison websites like RateCity, where you’d be able to compare multiple car loan brokers, as well as non-broker car loan options.
Can a home loan broker also be a car loan broker?
While some mortgage brokers specialise solely in home loans, and some car finance brokers specialise in car loans, there are some brokers and brokerage firms that can offer a variety of financial product types.
If you already have a good relationship with a mortgage broker, it may be worth getting in touch to find out if they can also provide car finance broking services. If they’re already familiar with your personal financial situation, this may help you save some time and effort when searching for appropriate car loan options. Additionally, they may be able to offer advice on whether your home loan may be able to affect your car loan application, such as whether you may be able to use equity in your property to help secure a car loan.
