One Car Or Two?

Getting the money together for a new car to replace your old one can be tough enough, which is why shopping around for a good personal loan is a real must. But what about when you don’t want to replace your old car but get a second one?

With a second car, you have to ask yourselves a few questions and think hard about your budget. If you’re still paying off Car #1, will you have enough in your pay packet to meet the repayments for two cars? Have you factored in that you will now need to pay for two registrations and two sets of repairs, not to mention extra petrol? It really pays to do your homework and have a good hard think. If you have already paid off one car, it might be easier to (a) get a loan for a second car and (b) make the necessary repayments.

As an aside, if you already have one car that you like and want to keep but your boss is offering you a novated car lease as part of a salary package, you might want to consider whether or not you want to use this offer to get a second car.

No matter what your situation  raising a personal loan or getting a car through a salary package scheme  you may want to ask the question whether you actually need a second car. Let’s face it: there is only so much petrol in the world and only so much space on the nation’s roads, and we all need to do our bit. On the other hand, some situations may require two cars.

So how do you decide on whether you should get one car or two? Here’s a handful of questions that you might want to ask yourself.

  1. How many people in your family? What are their travel needs? If Dad is on the road a lot and/or the kids do a lot of sport or other out-of-school activities, a second car is a bit of aIf there’s just you and you only travel to work, the mall and the movies (and maybe the beach), then you might not need a second car.
  2. Where do you live? If you’re out the back of beyond, it’s never wise to leave a family member stranded with no means of transport to the doctor or the nearest neighbour while you’re off in the only
  3. What sort of trips are you likely to make? If they are all shorter trips and don’t require much gear then you might be able to get away with doing the trip by bike or by foot.
  4. What is the public transport in your area like? If it’s possible to get to school, work or the shops (or even the doctor) by bus or train, then maybe a second car isn’t needed (OK, the bus may cost a bit but you’ll save on parking and maintenance).
  5. Do you have to take a lot of gear with you?

There are no quick, pat answers, and only you can decide what’s best for your family and your needs.

Turning Your Old Car Into Money

When you take out a loan for buying a new car, you usually need a deposit of some sort. Most car buyers have one readily available source of funds to get that deposit: their previous car. Of course, if you don’t already have a car or if you are looking for a second car, this option won’t be there. But you can turn your old set of wheels into the deposit for the new one.

The easiest way that you can do this is by trading in your old vehicle, using it as part payment for the new one. Many car sales companies are happy enough to do this. The advantage of this is that it’s quick and it’s easy  you just turn up with what you’re trading in and get the value of your old car taken off the price of the new one. You don’t have to fool around waiting for someone to come around to test-drive the car or pay for advertising. The downside is that you might not be able to get as much as you hoped for the trade-in. At some car dealerships, they have a set amount that they take off for trade-ins. You can try haggling, but it doesn’t always work. The amount you’ll get offered for the trade in will depend a lot on the age of your old car, the condition it’s in and even the make. The car salesperson is planning to make a profit off your trade-in, so naturally he/she will try to make that profit as big as possible when coming up with what your old wheels are worth.

The other option you have for turning your old car into ready money is to sell it. This can be done by putting it up for sale on the side of the road with a sign on the window in time-honoured fashion, or by listing it on an online site, either with or without an auction. The advantage of this method is that you can get a better price for your old car (though not always)  you probably aren’t trying to make a profit from the sale. You’re in control of the price, although if you’ve completely overpriced your old vehicle, you won’t be able to sell it. With an auction, you might be able to get a very good price indeed if the car you’re selling is desirable in some way (e.g. a sports car that you have to say goodbye to because you need a car that fits a family but the budget doesn’t run to two cars). The downside is that it can take a long time, meaning that you might have to wait until you have the cash on hand to use as a deposit to secure the loan for the new car.

Option number three is a cross between the two methods, where you get the sales yard to sell your old car on your behalf. Not all car yards are happy to do this, and even the ones that do will take a cut of the profits.

FIve Myths About Novated Leases

Most of us have at least heard about novated leases, especially with all the fuss last year about the proposed changes to the system, which were promptly scrapped again. However, for some of us, we may be holding back from agreeing to this form of salary packaging because we’re believing some of the very common myths about novated leases for cars.

Myth 1: You have to earn a huge salary to be able to afford the repayments.

While the most noticeable novated leases (and cars bought on a novated lease scheme) are the ones that involve the latest and best luxury vehicles, this isn’t always the case. You don’t have to be in the top tax bracket to benefit from a novated lease  and you don’t have to purchase a fancy new car through this system easier. In fact, a novated lease agreement can keep you in a lower tax bracket while still getting rewarded by your employer for a job well done. And you can get any sort of car under a novated lease scheme, as long as you can afford the repayments  just like you would with a personal car loan. However, there are some limits on the age of car that you can get  you can’t get a really old banger. But would you really want to?

Myth 2: You have to travel heaps of kilometres to really benefit from a novated lease.

One of the issues with the proposed FBT tax changes last year was to do with the keeping of logbooks to keep track of your kilometres travelled. Some may have thought that you had to be on the road just about all day every day before you could benefit from a novated lease. This isn’t the case  you can reap the benefits even if you just use your car for the daily commute (and we all use our cars for way more than that). In fact, if you travelled all day every day for work purposes, the chances are that you’d be issued with a company car anyway.

Myth 3: You have to be using the car for work purposes to get a novated lease.

Under a novated lease scheme, you can use the car for business purposes or personal purposes or you could even just leave it sitting parked in the driveway to impress the neighbours. It’s like taking out a personal loan for a vehicle except that your repayments are taken out of your pay packet before your boss gives it to you rather than afterwards  meaning that you have less income tax to pay (OK, there’s fringe benefit tax, but that’s another story  ask us if you’re not sure about how this works). Once you’ve got the car, you can do what you like with it.

Myth 4: You don’t need to insure a vehicle that’s under a novated lease.

Don’t be fooled! Like any other car, you will need to make sure that it’s properly insured so that you’re covered when you’re on the road.

Myth 5: Your employer gets to pick the sort of car you get under a novated lease scheme

The choice of car is up to you, as long as the repayments are manageable and the car is under a certain age (usually 8 years). After all, you know your personal needs in the way of a vehicle better than your boss does.

Not All Loans Are Created Equal

If you’re new to the world of car loans and personal finance  perhaps because this is the first car that you’ve bought for yourself  then you might be fooled into thinking that all loans are created equal and it doesn’t matter which finance company you go with. This is one of the reasons why this company exists  we’re here to help people like you work out what they need and get the best deal out there. Because not all loans are created equal.

The most obvious thing about a loan is the amount you’re borrowing  known as the principal. This is the sale price of the car, usually with a processing fee on top of that. You will probably have to put a deposit (an initial payment) on the car. The bigger the deposit, the less you have to borrow. And the less you borrow, the less you’ll end up paying in interest.

The first place where most car loans differ is in the area of interest rates. In general, the lower the interest rate, the less you’ll pay in the long run  although loans with a low interest rate tend to be for a longer term so the loan company will maximize the amount of interest they end up collecting off you. Remember calculating compound interest during maths class in high school? Compound interest isn’t just a fancy idea dreamed up by maths teachers to torment you. It’s what they use on most loans. Interest rates can be fixed (always the same), floating (going up and down) or capped (going up and down but never over a certain limit).

The term, mentioned in the previous paragraph, is the amount of time it will take you to pay the loan off. Although everybody’s situation is unique, it’s wisest to choose a term that will be shorter than the amount of time that you plan on owning the car. It’s harder to resell the car if you still owe money on it (in fact, this is one of the things that second-hand car buyers need to look out for). You don’t want to keep paying off a car you no longer own. The loan company will get rather snippy if you do sell it, as they have some rights to that vehicle until the loan is paid off and you own it outright.

You also have the repayment amount to workout. Repayments can usually be done monthly or fortnightly, usually by an automatic payment from your bank account. The amount you have to repay per fortnight or month is tied up with the interest rate, the principal and the loan term. Finance advisors tend to recommend that you go for fortnightly payments rather than monthly ones, as you end up paying back more of the loan in a year (assuming that the loan term is for more than a year, which it usually will be) this way. There are 26 fortnights in a year but only 12 calendar month, and the more interest you can slice off, the better it is for you.

Some loans allow you to make lump sum repayments on top of your usual regular repayments. Some don’t. Some charge an extra fee if you pay the loan off earlier than the due date. This is something that you need to bear in mind when you take out a loan. If you do end up with a bit of a surplus in your bank account, it can be more financial sense to pay a loan off (and reduce the amount of interest you have to pay) than to put it in a savings account (where you will earn some interest but not as much as what you have to pay).

If you have any other questions about loans and borrowing, then please ask us. It’s what we’re here for and we won’t think you’re thick if you ask.

Tips For Managing Your Car Loan

A car is probably the second-biggest purchase made by the average person these days, second to that mortgage on a home (although, these days, a university education could probably be considered a purchase that would put the car into third place). Some people are lucky enough to be given a salary package that includes a novated lease on a vehicle. Others, however, need to find some alternative form of finance when they need to get a new set of wheels.

Because car repayments can be such a big commitment, it pays to think carefully before you head out into the car yards. It can be hard to keep your head and make wise decisions about repayments, loans and financing when you’re confronted by an amazing shiny new car and a very persuasive salesperson. The really important thing is to stop yourself from getting in over your head.

Some simple tips will help you manage your car loan by making wise decisions before you begin the process of shopping around for a new set of wheels:

  1. Set a budget. Work out how much you can afford per week or per fortnight and stick to it. Don’t commit yourself down to the last dollar of your paycheck  there is always some unexpected expense that crops up somewhere.
  2. Remember to include things like car maintenance, insurance, registration and fuel in your budget. If your previous car was a frugal little vehicle but the new car that you’re buying to fit in your growing family is larger and has a bigger engine, then you may well face paying more for fuel as well as the repayment amount. If you haven’t bargained on this, you may find yourself in financial trouble.
  3. Shop around. Don’t just settle for the first deal or finance package offered to you by the car salesperson. Take the time to find the best deal that works for you and your situation  or get us to do the hard yards for you. Things to take into consideration include repayment amounts, interest rates, loan terms and whether or not you can make extra lump-sum repayments. If you already have a good credit history with a particular lender (e.g. a bank or credit union) then you may be able to get a better deal with these people, as they already know what you’re like. (Don’t forget to let us know about this sort of thing when you contact us about finding the best car loan provider for you.)
  4. Use debt calculator tools to find out how much interest you will end up paying. You may be surprised at how much more you will end up paying in the long run.
  5. The bigger the deposit you can scrape together on the car, the less you will have to borrow, which means that you’ll pay less interest in the long run. Don’t forget to ask a car dealer (preferably over the phone or via email to avoid being pressured by a face-to-face situation) about the possibility of trading in your old vehicle to cover part of the payment.