Car Finance Agreements

A Little Bit about How Car Finance Agreements Work

Virtually every American has a car. Further, most need them for transportation to and from work, school, and church, three integral parts of life nobody wants to miss. Sometimes, people don’t have enough money to purchase their first car or trade anything to lower purchase price. Car dealerships and financial institutions work together in tandem to originate and customize car finance deals.

Banks and other financial organizations give car dealerships a discounted, lump-sum value in exchange for the rights to collect payments from those who signed car finance agreements. Thanks to the potential premium loan handlers can receive through diligent bill collection efforts, financial institutions have significant interest in car finance agreements.

Let’s look a little further into how car finance agreements work.

What profit is there to be made from financing?

Financiers make money from charging interest on outstanding balances not yet submitted and from financing fees. When car dealerships take on the role of servicing car finance deals, sending bills, recording payments, and collecting on potentially stale accounts, they’re less likely to earn as much money as financial institutions that offer car finance account maintenance. Car dealerships often desire to take a discounted lump sum on the suggested purchase price of vehicles in Car Finance Stratton┬ádeals. Doing so guarantees a large portion of cash, not to mention eliminates expensive labor charged by maintaining car finance deals month by month.

Due to the discrepancy created by such deals, banks and account managers are potentially able to collect on the sizable discount incurred during purchase. Financing fees aren’t as high as covering these premiums on sales and buys, although financiers are able to pay for collection efforts and account management solely with these fees.

How do they evaluate customers?

Interest rates vary based on how much money people put down and how trusted they are. New customers with sizable down payments are often OK, whereas those with no lending histories and low credit scores may get turned down by a number of dealerships.

First, they have clients fill out basic information to identify them. Next they pull their clients’ credit reports from Experian, TransUnion, and EquiFax, the three most reputable credit bureaus. A hard inquiry shows on applicants’ credit reports because they applied to a vehicle financing agreement, temporarily reducing credit score.

Some dealerships are more risk-averse than others. People with low credit scores, small incomes, high risk are often welcomed by dealerships that offer higher-interest loans, which usually offer their own financing. However, following this path of car financing is a great way to waste money.

How do they enforce payments?

Customers get to drive off in vehicles that aren’t legally theirs under ownership, despite them having access to drive. As such, it’s not always easy to enforce payments. People with low credit scores often have to put down collateral, something many dealerships and financiers take instead of staying in pursuit of delinquent payments.

If you study these tips a few more times, you’ll be a car finance expert in no time.

Overlook A Novated Lease

Why You Shouldn’t Overlook A Novated Lease

A novated lease may seem like another buzz word that seems boring, but you should know that it can really save you money. Car leases are typically between the buyer and seller, but adding your employer to that lease can make it a better deal. This adds a whole new dynamic to purchasing a car that you may not have known about.

What Really Is A Novated Lease?

It may seem like a seedy deal to pay for something that you fully own, but it is common practice and totally legitimate. The Australian government only sees a novated lease as adding a new party (your employer) to your lease agreement. This will result in your employer paying for your lease and they will take it out of your check prior to taxes being paid.

You will typically see a Novated Lease at Stratton last between two to five years. Once the lease is up, you can trade it in for another leased car. You may also pay a lump sum to keep it for yourself. It is probably more desirable to get the new car, but you have the right to buy the older one if you are really in love with it.

The Tax Benefit Of A Novated Lease

The main reason why most people go for novated leases is that it can lower your income taxes. As mentioned before, the money will be taken out of your pre-tax pay and your paycheck will be smaller. When filing your taxes, the money that your receive in your check is what counts overall. Since you wanted to buy or lease a car anyway, you are essentially getting a huge indirect discount through a tax loophole.

Isn’t A Novated Lease The Same As Renting?

Renting an over-abused car from the airport really is not like a novated lease. A novated lease is an agreement between an employee, employer and the dealer. The employer will be responsible for making payments and the employee is responsible for taking care of the car. The expenses of the car will also be taken out of the employee’s pay, and will essentially add to the bundled savings of this scheme.

The government is indeed aware of this scheme, which is why they have a Fringe Benefits Tax. Fortunately, this tax is very mild and you will still end up with huge savings. The annual FBT in the instance of a novated lease will be 20% of the car’s value. The amount of savings will also apply to just about any tax bracket.

The Risk Of A Novated Lease

This type of lease does still have its share of risks. If you lose your job, you will no longer have somebody to pay the lease and your car will disappear with your job. If your current employer does not decide to accept your novated lease idea, you are left handing unless you find another stable employer. Keep your job security and the relationship with your employer in consideration before taking on this sort of lease plan.

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Best Deal On A Car Loan

How To Get The Best Deal On A Car Loan

Getting a good deal on the purchase of a new car is only half of the battle. To get the best deal overall, you will need to secure a good car loan as well. Getting a good auto loan can be tricky if you don’t know what you are doing. Thankfully, there are many tips that anyone can use in order to get the best deal they possibly can. Below are some of the top tips to consider in advance before you get started on your loan and car shopping.

Shop For Car Loan Separately

Before beginning the car shopping process, it is always best to have your loan secured beforehand. Knowing exactly how much you have to spend ahead of time will give you the best advantage to negotiating yourself a great deal with the seller. Start early and begin applying for auto loans with your local banks, credit unions and reputable online loan lenders. Some people are even able to get good loan deals through their car insurance companies. It is in your best interest to get approval for a Car Loans at Stratton Finance before even stepping onto a car lot.

Don’t Loan Shop All At Once

Each time that you apply for a car loan, even if you are approved, you will make your credit score go slightly down. This can make it difficult to get a great deal on future loans that you apply for. When shopping for new auto loans, try and do them all within a two-week period of time. All applications within this time frame will only count as a single inquiry.

Familiarize Yourself With Your Credit Score

To have a better chance at scoring a great deal on a car loan, you will need to know what kind of credit score you are working with. You are able to get your free credit report from the top three reporting agencies once per year. You should look over each of them carefully before applying for loans to see if there are any errors or inaccuracies which could hurt your chances of getting approved for loans. Get anything fixed that needs to be before applying for your car loans.

Shop For Total Loan Amount

When most people are car and loan shopping, they tend to pay more attention to how much the monthly payments are going to be. The only time this should be considered is when you are calculating it in private. When you tell a lender or car dealer how much you want to pay per month, they will just find ways to get you extended loans and have you spending much more overall on a car than you will want to. This is a technique that they use to get you to spend more on a vehicle. The reason lenders do this is because they want you to end up spending more money on interest.

Don’t Assume Your Offer Is The Best

No lender is obligated to offer you the best rate in which you qualify for. They are in the business of making money off of you and the best way they do this is by getting the most interest they can off of your loan. When shopping for a car loan, let lenders know what you want and tell them you have other offers on the table. This is the best way to get a better rate. Additionally, you can check online for current auto loan rates to compare.