Vehicle and Equipment Finance – Avoid Dealership Loans!

Vehicle and Equipment Finance

Always avoid the dealer’s vehicle and equipment finance.  Buying a new car or equipment for your business is a major commitment and one of the larger purchases you will make.  Vehicles and equipment are costly but necessary assets for most business’ operations.  You want to get the most reliable vehicle or equipment for the best price.  Car and equipment dealerships and their sales teams are structured to try and make as much money from every transaction as possible.  The following will inform you why you should have your vehicle and equipment finance arranged prior to negotiating your next purchase.

Prioritise your Vehicle and Equipment Finance

When you buy a vehicle or machine from a dealer 99.9% of the time they will ask, “are you paying cash or financing your purchase?”  If you are paying cash they will push hard for you to sign a contract of sale and place a deposit.  If you need finance, they will still push hard but they will offer you dealership finance through their in-house lending.   There is no doubt a level of convenience to arranging vehicle and equipment lending through the dealer but unfortunately this is where the positive aspects to financing through your dealer ends.

Better Negotiating with Vehicle and Equipment Finance

When you decide to commit to purchasing you will have shopped around and hopefully negotiated for the best possible deal for your vehicle and equipment.  The same applies for your vehicle and equipment finance.  When applying for vehicle and equipment loans you want to get the best possible interest rate with minimal fees and charges. You will also need suitable terms for your unique financial position and requirements. For strong negotiating power with the best financial deal engage a vehicle and equipment finance broker.  A vehicle and equipment finance broker will take the time to understand your financial position and ensure your loan term matches your lending requirements.  For strong negotiation power, engage a vehicle and equipment finance broker for the best finance deal.

Poor Customer Service with Dealer Finance

In most cases once you do sign your contract of sale to purchase your equipment or dream car your dealer will move onto their next sale. As far as they are concerned the deal is done.   Don’t be surprised once you pay your deposit that there is very little support from the dealer moving forward.  Often there will be no support with your ongoing enquires from your dealership finance.  Finance brokers are licensed experienced lenders that provide ongoing support and customer service.

Limited Vehicle and Equipment Finance Options from Dealers

Often the in-house dealer finance position is a steppingstone role from car sales role.  Most of the time the person in this role will have had very little experience in lending before they are promoted to that position.  They will have had very little to no understanding of the lending industry and not be aware of the many lending options and structures available to you. 

Confidential Credit Analysis

Applying for vehicle and equipment loans can be a complicated process especially if your loan requires a full assessment by the lenders credit analyst.  You want an experienced vehicle and equipment finance broker or banking professional to be applying for your lending inquiry. As every finance enquiry will be noted on your credit history and can affect your overall credit rating.  A licensed vehicle and equipment finance broker will provide a quality, reliable and professional service.  Your finance broker will offer ongoing support and will always be accessible by phone for any advice surrounding the loan moving forward.

Limited Vehicle and Equipment Finance Options from Dealers 

Vehicle and Equipment Finance Brokers have Multiple Lenders

Dealer finance options are often limited to 1 or 2 banks. A licensed vehicle and equipment finance broker will have a range of 20 to 30 lenders that specialise in different types of loans for different types of deals.  The fewer lending options available to you, the more limited you are in terms of credit policy and negotiation power for interest rates.  When it comes to shopping for your vehicle or equipment you want options and it’s the same for your finance.   Dealership finance will try to make your lending requirements fit their limited lending options and credit goal posts.  The reason they are limited to the lending options is because dealership finance are not accredited with many of the major banks.

Vehicle and Equipment Finance Brokers do the Hard Yakka

Your vehicle and equipment finance broker will take the time to understand your financial position and lending needs.  The other more attractive side of using a vehicle and equipment finance broker is that they will do the hard work of shopping around for you.  They will find the best bank for your vehicle or equipment purchase.  They will also only apply for finance once they are certain it is the best fit for you to meet the debt servicing requirements of that lender.  This avoids multiple enquiries and keeps your credit report clean.

Low rates don’t mean great deals.

It is very common to see very attractive interest rates advertised through dealerships.  But don’t be fooled by these dirty marketing tactics.  A low interest rate does not determine a cost saving deal for your vehicle and equipment lending.  Often dealership finance will structure ongoing account keeping fees, establishment fees and loan doc preparation fees into repayments.  This allows them to display a lower interest rate, but you could have higher repayments.  Often a finance broker’s repayment will be lower but could have a higher interest rate. The higher interest rate with no or lower fees often equates to a more lucrative deal – costing you less!  You need to compare apples with apples (see example below).

Example: Low Rates Don’t Mean Great Deals

Lender option Dealer Finance Broker Finance
Loan Amount $50,000.00 $50,000.00
Term 5 years 5 years
Balloon/Residual 0% 0%
Interest rate 3.5% 4%
Monthly account fee $20 $0s
Monthly repayment $926.94 $917.77
Monthly Difference   $9.17 higher $9.17 savings
Total Savings   $550.20
Lower rates don’t mean great deals

This table above shows that the dealerships interest rate is lower at 3.5% but their repayments and overall cost is higher.  Although $9.17 appears to be a minimal monthly cost savings, the total over the five year term is more than $550.  This is a reflection of dealership finance misleading and dirty tactics.

Dealership Finance Consultant Works Closely with Salesperson

Finance dealers will also work closely with your car salesperson to make sure they win on one side, or if not both sides of the lending and sales transaction.  They will give you a cheap sales price with high finance or vice versa. You need to review both the finance and the cost of the purchase. These are two separate transactions.  It is often misleading and hard to identify your overall position if these two transactions are not clearly and distinctly defined.

Leave Lending to Vehicle and Equipment Finance Brokers

The dealerships are specialists in selling cars not lending.  Dealerships sell cars not loans.  Vehicle and equipment lending brokers are experienced and qualified to arrange the best finance option for your lending needs.  A vehicle and equipment finance broker is authorised to engage in specified licensed credit activities.  They undergo extensive background checks and required to comply with all lending laws and regulations.  Vehicle and equipment finance brokers are trustworthy and reliable.  If you want a competitive equipment or car loan for your next purchase, then engage an expert vehicle and equipment finance broker.

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