Imagine you have decided on a car, you’ve done your research online, watched countless videos on Youtube and now have your heart set. You go to the dealership and get things moving only to be forced in front of the Finance and Insurance salesperson (also known as the “business manager”) This is not the Manager of the dealership, this is a finance salesperson whose role is to sell you their floor plan finance.
Next thing you know you have signed up to dealership finance, all these extras you weren’t planning for in what seems like at the time a ‘convenient’ option. You weren’t able to negotiate as hard as you would have liked and you feel a tinge of buyers’ regret. Worse, you’ve gone in front of the dealer Business Manager and you find out your credit score isn’t as good as you thought and the dealership has made it worse by putting an enquiry on your file.
Compare Everything. Regret Nothing
Now imagine you’ve done this part via a pre-approval before you go anywhere near a contract or even a test drive. You know what your repayments are, you know what you can comfortably afford and you have now just to choose and finalise the car. You walk in like a cash buyer. You also walk in knowing what your limit is.
What is a finance pre-approval?
A finance Pre-approval is the lender providing a conditional “Yes” to loan you a certain amount of money. The conditions could be simply for the lender to approve the asset (eg the car) or to ensure that the Loan to Value Ratio (LVR) is within the lenders’ rules.
With a pre-approval, you can confidently strike a deal with a salesperson or a second-hand seller and ensure you don’t miss out. Since COVID-19, vehicle stock continues to be in short supply for new and second-hand vehicles in Australia, so having the pre-approval in place will ensure you don’t miss out.
How does a broker help?
If you’re anything like me, I go online and compare prices of a fridge between retailers before I buy. I will also visit two or 3 shops to get the best deal. Why should finance be any different? Well, the problem is, to go directly to 3-4 banks, you need to apply. This puts an enquiry on your credit file and is known as “Credit Shopping”. It doesn’t look good on your credit file as it just shows that you’ve applied and NOT what the outcome was. Also, who has the time to make 3 or 4 applications, deal with the phone calls and emails? Enter the finance broker. A broker works for you, not the banks. A broker is paid as part of the deal by the lender and is governed by a strict set of rules that ensures the loan or product you are being offered is not unsuitable.
A good broker will scour the market and find the best repayments and terms based on your personal financial circumstances WITHOUT making an application. They do most of the paperwork for you, so usually you are just going to be signing some privacy documents, quotes and contracts. A good broker will be there with you right to the finalisation of the loan and beyond.
The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it.