Motor vehicle finance
Many consumers may take great care in selecting a motor vehicle to purchase, only to accept the first finance offer made available to them. However, by rushing into a loan contract, consumers may not end up with the best deal available. Where finances are tight (especially with rising interest rates), obtaining the best deal available may mean the difference between meeting regular loan payments and losing a new car.
Potential borrowers seeking to finance the purchase of a motor vehicle are therefore reminded to set a budget and shop around for the best loan available before they start looking for a car as there are a variety of loan products available on the market.
Potential borrowers should be aware that, generally, persons carrying on the business of negotiating or arranging loans are required to be licensed as a finance broker. As finance brokers are generally paid a commission by the lender, there is often no direct charge to borrowers when using a finance broker to negotiate or arrange a loan. Moreover, persons engaged in unlicensed finance broking activity are not eligible to receive payment in respect of their services in that capacity.
Licensed finance brokers are also required to abide by both a Code of Conduct and a maximum scale of remuneration published in the Government Gazette. Under the Code, licensed finance brokers must act in the best interests of their clients and also disclose in writing the amount and terms of any commission.
Depending on the particular circumstances, finance consultants operating from the premises of a motor vehicle dealer may not be required to be licensed as a finance broker. Consequently, borrowers may wish to confirm that the terms of any loan arranged by such consultants are competitive with those offered by licensed finance brokers (e.g. is the finance consultant receiving a commission which exceeds the maximum scale of remuneration for licensed finance brokers thereby increasing costs to the borrower).
Persons who have borrowed funds for personal purposes (as opposed to business or investment purposes) should also be aware that if they experience financial trouble due to an unexpected or temporary event, such as the loss of a job or illness, the Consumer Credit Code provides that they may be able to have their contract changed for a short period so that they can better meet repayments. Under the Code, a court can also order changes to a contract if it is considered unjust.
Borrowers experiencing difficulty in meeting loan repayments can also contact the Financial Counsellors Resource Project on 9221 9411 to locate a financial counsellor who can provide free budgeting advice.
For more handy tips regarding credit or the purchase of a motor vehicle, visit the motor vehicles section of our website.