Buying a car is usually an emotional experience, especially for consumers. It’s easy to get caught up in the excitement of buying a shiny new car; you sit down with the finance person, and they make it all sound so easy - the payments are something you can afford, all you need to do is sign the paperwork and you can be driving your new car in next to no time.
However, it’s when you get home and take a closer look at the paperwork, only to realise the rate you have been offered by the dealership is not that flash. At this point, buyer’s remorse usually sets in, but it doesn’t have to.
The good news for SMEs is that they use their cars as tools of the trade – and while they can also get caught up in the heady emotions of buying a new car, they are more likely to shop around for a better deal.
The best way to compare pricing is to get a quote from your dealer, and/or your finance professional and take the time to look over the overall costs of the quote and not just the interest rate.
Some quotes are rate + fees and some quotes include all fees in the interest rate. It’s best to get this all in writing and look at the details with someone you trust.
Different types of agreements are available nowadays to fund a new car. The type of agreement that’s the best fit for you depends on the type of business for which you’ll be using your new vehicle.
Most businesses choose to finance under a chattel mortgage, as this option allows you to claim back GST, depreciation and interest (when the vehicle acquired is used for business purposes).
A chattel can be done with or without a residual, and the value of the residual should be set at the value of what the car should realistically be worth at the end of the term of the loan.
In recent years, we have seen residuals increasing, whereby dealers are offering higher than Australian Tax Office guidelines for a car residual or offering a guaranteed future value (which is essentially the residual).
This payment method can keep the monthly payments down BUT, there are boundaries around these agreements, such as how many kilometres per year you can travel.
And one of the biggest headaches can be encountered should need you try to get out of the car purchase at any time during the contact. You could find yourself going backwards on the financing to the whole value of the car itself.
By taking your emotions out of buying a car – whether it be for small business or your own personal car – you can get yourself a great finance deal.
Now could be the right time to start building a relationship with a trusted finance professional who not only knows financing inside and out but also knows how to help your business expand its assets and position itself for growth.
About the research
SMEs make up 96 per cent of Australia’s businesses and employ around 12.36 million people, making it imperative to the Australian economy that they have access to good financing options to support their operations and growth. With commercial vehicles making up one in four cars sold this year, new research reveals that SMEs seek good-value vehicle financing and 56 per cent do not have confidence in loans offered by dealerships.The figures have been revealed in a new survey of an independent panel of 202 directors and decision-makers of SMEs commissioned by business loan comparison site Small Business Loans Australia.
Tina Clark is Owner of Auscorp Finance Pty Ltd and Director of Laurentide Financial Services Pty Ltd. Visit www.laurentide.com.au
