There are a number of financial decisions involved in purchasing a new vehicle.
Can you afford one? How many cars can you buy? And does it make sense to pay cash or make a financing arrangement?
Even after crossing those bridges and coming to the conclusion that you’re ready to borrow money to buy a new set of wheels, the question remains – should you finance through a dealer or look elsewhere?
Dealership financing is a growing field, and it’s unusual for a potential car buyer to go through the process without receiving detailed information about loan options.
So how does dealership financing work?
At their core, dealer finance packages are no different than loans sold by banks and other financial institutions.
Any car finance deal involves borrowing money with a lender to cover the purchase price of the car and agreeing to pay it back in installments, plus interest, over a set period of time.
The loan may or may not include an upfront deposit or ‘balloon payment’ – a lump sum of money you agree to pay the lender at the end of the loan term.
“Dealer financing helps customers throughout their buying journey to buy a car they thought they couldn’t afford in the first place,” Waverley Mazda general manager Ravi Emaduwage said. Automotive expert.
“Whether it’s a model upgrade or trim, financing gives buyers the opportunity to put down an initial payment and then cover the value of the car through regular payments.”
In most cases, loans offered by auto dealers are originated from a third-party finance company and repackaged for the car buyer.
Some manufacturers and dealers have a dedicated in-house financing department, while others outsource the process to an approved sponsor.
For example, Toyota has its own finance business – Toyota Finance Australia, a subsidiary of Toyota Motor Corporation – which also acts as a finance provider for Mazda Financial Services.
Mazda Financial Services operates through participating Mazda dealerships, although Waverley Mazda in Melbourne is an example of a dealership that assigns finance to an independent company (Angle Finance).
The benefits to dealers and lenders are clear, but what do car buyers need to consider?
Financing through a dealership is often the most convenient way to get a car loan because it eliminates the process of shopping around for the right loan deal.
“Financing through a dealership is an easier way because you have a one-stop shop where buyers can come in and buy a car, get financed and drive it out all at once,” Mr. Emaduwage said. at the time”.
On the other hand, you likely won’t get the best deal if you don’t compare all the options.
After all, when financing with a dealer, both parties need to make a profit, not just one party when borrowing directly from a lender.
With that said, manufacturers often use financial incentives as a means to attract buyers.
According to Mr. Emaduwage, finding financing from agents also brings benefits in terms of products.
“With dealer financing, you’re really meeting a person,” he said. “You can interact with a Mazda employee and all of our finance staff are recognized through our sales process. They all know all the cars, they make all the modules and they understand the cars just as well as the sales people.”
Ultimately, how a new car buyer chooses to finance his or her vehicle depends on personal priorities.
Do you want the purchasing process to be done in one place? Or are you willing to put in some extra work to achieve the best financial results?
It’s a decision people have to make every day. The 2018 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry found that 90% of new car sales were arranged through finance and 39% of those sales Financed through dealer.
Waverley Mazda’s recent numbers show that trend is continuing.
Disclaimer: The information on this website is for general purposes only and is not a substitute for professional financial advice. CarExpert recommends that you seek independent legal, financial, tax or other advice specific to your personal circumstances.
