Whether you're buying a car for the first time or you've been through the process before, it's always worth considering whether or not you should use a finance broker to arrange your car loan.
In this article, we'll weigh up the pros and cons of using a specialist finance broker so that you can make the best decision for your circumstances.
A Finance Broker, by definition, works for you, not the lender. They should have extensive knowledge of the different loan products on the market and can help you to find the most competitive interest rate.
When you work with a broker, you can expect the help and advice you need to find the right loan for your situation. They'll be able to explain everything about the loans they offer, including interest rates, repayment terms and how much you can expect to borrow.
You don't need perfect credit or any credit at all — most brokers will consider your situation on an individual basis. This means that, if you have been turned down by other lenders or you've had issues making repayments in the past, then a broker may still be able to help you secure a deal.
As long as you are an Australian Resident, have been employed for at least three months and are over 18 years old, then there's no reason why a broker can't help.
1. Access to a wider range of lenders:
By working with a finance broker, you'll have access to a wider range of potential lenders than you would if you were to apply for a loan on your own. This gives you a better chance of being approved for a loan the first time you apply.
It's important to remember that every loan enquiry that you make will be recorded on your credit file and could affect your credit rating ... whether you are approved or not.
If you make too many loan enquiries then it will become more difficult to obtain finance. A specialist Car Finance Broker will help protect your credit rating by applying only to lenders that are likely to approve your application, taking into account your specific circumstances.
2. Lower interest rates:
Because finance brokers have access to a wide range of lenders, they can often negotiate better interest rates on your behalf. This can save you money over the life of your loan.
Some of the lenders work exclusively through brokers and many others are accessible through brokers at wholesale or discount rates.
3. One-stop shopping:
Applying for a loan can be a time-consuming and complicated process.
By working with a finance broker, you can simplify the process and save yourself a lot of time and hassle.
4. Expert advice:
A finance broker can provide you with expert advice on the best loan options for your needs and situation. This can be extremely helpful if you're not sure where to start or what kind of loan structure would be best for you.
1. Broker fees:
Some Finance Brokers will charge a fee for their services. This fee can range from a few hundred dollars to a few thousand dollars, depending on the size and complexity of your loan.
Whilst you may not be required to pay a fee upfront, out-of-pocket, it may be built into the loan - meaning that you will be borrowing the amount of the fee on top of the loan amount that you otherwise required.
If there are any broker fees payable, you should ensure that they reflect the interest rate savings, the advice, the convenience, lender access and the overall benefits that you would not have otherwise gained.
Working with a finance broker for the first time can take some time, as you'll need to provide them with information about your financial situation and goals.
If you're in a hurry to get a loan, working with a broker may therefore not be the best option for you. Whilst most brokers are well set-up for fast turnaround on loan approvals, in some cases, it may be quicker to phone your bank if you have a healthy relationship with them.
On the other hand, if you want the best deal, it would be well worth contacting a broker. Car loans can generally be approved and settled within a day or so.
3. Loan servicing:
Because they're not affiliated with any one lender, the Finance Broker may not be able to offer you the same detailed level of service or support that you would receive if you went directly to a bank or other financial institution.
So if you arrange your loan through a broker, you will still need to communicate with the lender directly on any administrative issues relating to your loan after it has been settled.
Whilst the benefits of using a finance broker to get a car loan far outweigh the downsides in the vast majority of cases, the decision on whether or not to use a finance broker to arrange your car loan is one that comes down to personal preference.
If you're comfortable doing your own research and you're confident you'll be able to find a good deal, then going it alone may be the best option for you.
However, if you feel like you need a bit of extra help to find the right loan, then using a broker may be the way to go.