‘Too good to be true’ car loan offers sparks warning

An expert has warned consumers if a car loan sounds too good to be true, it probably is.

Savvy

An expert has warned consumers if a car loan sounds too good to be true, it probably is.

SHINY new car loans flaunting deals as attractive as zero per cent interest can be enough to start your engine.

But, an expert has warned consumers not to fall for the sparkles before checking under the hood.

CEO of finance company Savvy Bill Tsouvalas said there was an abundance of offers from many manufacturers around low rate and no rate car loans including zero per cent financing.

He encouraged those looking to purchase a car to be wary of offers in market and know the right questions to ask when seeking finance from either a bank, credit union, dealership or broker.

“Offers promising zero per cent or two per cent interest have been around for some time now,” Mr Tsouvalas said.

“We have customers all the time come through saying they can get a 2.5 per cent rate for their car finance, but when you look at the fine print, there are usually a lot of strings attached and you can be far worse off in the long-run.”

He said an example of how consumers could be fooled could be the conditions applied to the purchase itself.

“Zero per cent on a rate generally means you need to pay for the deal in another way,” Mr Tsouvalas said.

“A manufacturer might offer a very attractive interest rate, but the limitations might be that it has to be a certain model, paid off over three years and you must pay the full retail price of the car.”

He said the most important element for consumers to focus on when getting a car loan was the monthly repayments.

“Car loans are so simple – we don’t need to complicate them,” he said.

“What matters is how much money is coming out of your bank account each month.”

[CAPTION: Asking the right questions when researching for a car loan can save you money.]

He said while the repayments should be the most important aspect of the loan, consumers could find themselves out of pocket if they failed to ask the right questions.

1.       What are the establishment costs?

This has an immediate effect on the overall cost of the finance repayments. It’s generally built into the finance, so the higher the establishment costs, the higher the overall repayments.

2.       What are the monthly fees?

Find out what else you will be paying on top of your actual loan repayments. This will impact your comparison rate and monthly repayments.

3.       What is the comparison rate?

A comparison rate combines all the fees and charges connected to the loan and helps the consumer understand the ‘true cost’ of a loan. It can be useful to compare various financier offers from a top-line view, but be sure to seek individual quotes for your circumstances.

4.       Are there any discharge costs?

Whether or not you’re planning to discharge the loan early or not, it’s still important to know if there are any discharge costs involved as some of those fees could blow out to $1000 or $1500.

Mr Tsouvalas said consulting an expert like those at Savvy allowed you to compare offers between banks, financiers, dealers and brokers to make sure you get the best deal.

Originally published as ‘Too good to be true’ car loan offers sparks warning