A Cautionary Tale

Some people who are in the process of buying a new car might be a bit sceptical about the whole thing. They might be coming from the angle that you pay less if you can buy a car for cash and if you don’t have a whole lot of money saved up, you have to be content with buying yourself a more humble car rather than some flash new thing. Well, this idea does have some merit to it. It is certainly that the less you borrow, the less interest you’ll have to pay. And it is also true that if you aren’t rolling in bucks, you are wise not to buy the new flashest car in the sales yard.

But you can go too far in this direction. Sometimes, what you’ll pay in interest when repaying a personal car loan turns out to be less than what you can end up paying if you buy a car that’s too cheap and a bit dodgy. Here is a true cautionary tale that happened to someone this writer knows. Names of people and a few identifying details, such as the make of car, have been changed for privacy reasons, but apart from that, this is a fair dinkum story.

Tony had managed to land a regular job in the building industry and was getting a steady income. Nothing stellar but enough to pay the bills and have a bit left over to pop in the bank. At this point, Tony didn’t have a car but used the good old pushbike to get to work. So far, so good. But Tony wanted to get himself a car, as it was getting a bit much to bike to work and then slog away all day doing physical manual labour and then bike back again when he was tired. Winter was approaching, too, and although biking on a sunny day makes you feel virtuous, healthy and financially savvy, biking in the rain is pretty miserable and sets you up for being soaking wet all day unless you have somewhere to change. So it was time to head down to the second-hand car yards.

Now, Tony could have used the money he had saved up as a deposit and then found a loan package that let him pay off a manageable amount per week. But Tony thought he was far too smart for that and decided to use the amount he had in the bank as his maximum price limit. Now, this would have been OK if he had a bit more tucked away in the bank  you can pick up a reasonable and reliable car for a four-digit price if you shop around. However, Tony didn’t have that much tucked away. It was four digits, but it was in the lower end of the four-digit figures.That was the first snag. The second snag was that Tony had a particular fancy for one particular make of car and wanted to get that sort and no other.

Tony found a car of the type he wanted for the price he wanted and felt very smug for a while. But then the problems started. Now, the sort of car that Tony loved wasn’t a sports car or anything of that sort but good examples of that car tend to cost a bit more than Tony wanted to pay. If you pay what Tony paid for his, you can expect problems. And the problems certainly came. What’s more, the cost of labour and parts at the local garage to fix the darn thing were well beyond what Tony could manage comfortably, and the mechanic wasn’t as flexible about weekly repayments as a loan company would have been. So it was DIY time.

At the time of writing, Tony’s car is up on blocks in his garage getting worked on during the weekend. All the spare money is going towards buying spare parts, and probably costs him as much as the loan repayments would have done if he had taken out a loan and got a better car. And Tony’s still biking to work every morning!

The moral? If you’re on a budget, it sometimes can be wiser in the long run to buy a slightly more expensive car and get a loan out for it than to buy a cheap old banger that falls to bits and costs you more in the long run. Either that or put up with the pushbike for longer until you have the funds to pay cash for it.

Coffee Beans and Counting Beans

Business loans are good things for small start-up businesses and larger outfits alike. Usually, it’s the larger people who come to talk to us about setting up novated leases for vehicles or taking out a business loan to purchase some new equipment. And we know how to handle that. We also know how to handle things if we’re approached by one of the little people (and we don’t mean habbits) about business loans to get a vehicle for a small business.

Now, with a number of small businesses, you can use your usual vehicle for most of the work, and you might need to have a chat to a friendly accountant about what you do regarding claiming expenses back against tax, GST and all that sort of thing. But there’s one small job that offers a lot of flexibility and fun that requires a vehicle to get started: mobile coffee baristas.

Mobile coffee baristas are becoming more and more common, and the job usually requires having a special vehicle set up to do this. Not many of us have a spare car of the right sort sitting around ready to convert into a mobile coffee shop, so if you want to work for yourself, are keen about coffee and like getting out and about in your community, you are probably going to need to borrow a bit of cash so you can buy the car and kit it out with all the bits and bobs needed to make great coffee.

You’re going to need a fairly sizeable vehicle to start up a mobile coffee service. For a start off, you need something that has a fifth door so you can open up the back and make the coffee, but a little hatchback just isn’t going to do the trick. You need something with a bit more space than that. Nor will a ute do the trick, as it’s best to have all your stuff under cover  you’re going to need paper cups, remember. The best thing to look out for is a large MPV, an SUV or a 4×4. You might want to consider getting signage on the side of the car, so don’t forget to include the cost of this when you think about the amount you want to borrow.

You also need the coffee making equipment. Naturally, this means a caf quality espresso machine and probably a small bar fridge as well to keep all the milk in (and maybe the flavourings so you can offer flavoured coffee options). These will need to run on something, so look out for a vehicle that has power outlets sprinkled around the place.Petrol/diesel generators are pretty noisy and are likely to put your customers off, and although we get a lot of sunshine in our part of the world, you probably aren’t going to be able to power your equipment off the size of solar panel that can fit in or on a large car  assuming that you can fit one at all.

After these basics, it’s up to you. You probably need a good supply of paper cups and tops to go on them, ordinary milk, trim milk, soy milk, sugar, chocolate, marshmallows, tea and possibly some herbal tea into the bargain. You might also want to sell biscuits. Don’t forget a chalkboard or whiteboard to advertise your prices!

Where do you go with your mobile coffee machine? Just about anywhere that people gather: sports matches, markets, skate parks, malls Where two or three people are gathered together, somebody probably wants a coffee!

Let’s say that a few years ago, you started out as a small-scale contractor doing things like lawn mowing, window cleaning or home cleaning. And so far, your business has been doing pretty good. But you know that you can reach a bit higher and provide more services  and do a better job of what you do  if only you had an extra bit of equipment. You might want a stump grinder, a ride-on lawnmower, a set of scaffolding or an industrial strength steam cleaning machine (or whatever piece of equipment suits the next step you want to take with your business). You could go for the big commercial contracts and you know that the demand for what you want to do is there.

But there’s one small snag preventing you from taking that next step. Your business has been doing well, but you haven’t got that much stashed away in the account for purchasing a new asset for the business. This is where you need to start shopping around for an equipment loan so you can borrow the money you need to finance the new step. Well, you’ve taken the right step by coming here and reading this article.

Getting out a loan or a lease for business equipment is the same as getting out any other loan, really. You need to do your homework and ask all the questions before you sign on the dotted line. You need to make sure that you (or in this case, your business) can manage the weekly, fortnightly or monthly repayments (don’t forget to work out which of these would suit your situation best). And the usual rule about having a generous deposit so you don’t have to borrow as much applies.

You also need to ask a few questions that relate to business finance  have a yak to your accountant and do a bit more homework. If this is the first piece of big equipment that you’re buying for your business, you might need to work out what to do with assets and depreciation when it comes to accounting. You also need to ask about what is and isn’t a business expense that you can claim back against tax. And if your business has enough turnover for you to worry about GST, you need to find out what to do about that when you purchase your new asset.

And I know it’s not pleasant to contemplate, but you also need to work out what you’re going to do about your loan and whether you can manage it if your new business venture doesn’t prove to be as profitable as you thought it would be. Will you be locked into a lease agreement for ages? Can you re-sell the asset to raise the funds to pay back the outstanding amount? And can you manage the repayments now with what you are currently earning rather than relying on the extra you’re pretty sure you should be able to earn with the new piece of equipment?

Of course, there’s a good chance that your new venture will succeed, especially if you persevere and do a good job. We wish you the best of luck with it, whatever it is.

More Loan Ads Investigated

A few posts ago, we investigated a range of car advertisements and had a look at the loan packages offered when you bought through these dealers. However, car companies and the finance packages aren’t the only options when it comes to taking out a car loan. Sure, the loan packages you can get through car dealers are often very simple but if you’re smart, you probably want to shop around to find the best loan package which is why you’ve come this site so we can do all the legwork for you. You may have seen ads offering loans in other places.’ Let’s have a look at some of these and decide whether they’re a good idea or not.

From the very start, we can dismiss the sort of ad that landed in my email inbox this morning (oddly, the spam filter missed this one). This email simply said I am Mr XXXX the advertising agent of (name loan firm and the brackets were in the original). This company is a registered loan company that give out fund to those who need financial support in their businesses or other activities. Our offer is with a very low interest rate. For one to apply he/she must be above the age of 18.You have to take advantage of this as preference will be given to first seven applicant. All interested persons should contact us Via Email and then proceeded to ask for a bunch of personal details. We’ve probably all seen emails like this ‘ some are even briefer like yesterday’s beauty (which was caught by the spam filter): Do you need loan contact us now with: Name, Amount, Duration, Phone, Country.

No matter how badly you need a loan or whatever your history is, IGNORE THESE EMAILS. They are out to nick your personal information and even if they do give you a loan, the terms are likely to be absolutely vicious. Never trust any offer of a loan that comes to you  you should be the one to approach the company, not the other way around. And never trust a loan company that has an ad in bad English  if they’re good enough and they’re genuine, they should be able to hire a decent writer to do the job for them.

But what about other ads? Can you trust them? As usual, the age-old advice of caveat emptor (let the buyer beware) applies, and you want to keep your wits about you so you don’t end up wishing you lived back in the Renaissance or the Middle Ages when charging exorbitant interest was considered to be among the most disgusting of sins, on a par with perversion.

Let’s take a look such loan ad in my local freebie newspaper: this one offers hassle free cash loans and instant cash. It all sounds very easy but I, for one, would ask a lot of questions before hopping on their website and applying and would ask even more (probably over the phone) before calling out one of their mobile managers to come round and give me the hard sell. Frankly, the ad on the same page that offers cash for scrap metal looks a lot more trustworthy and attractive. Some of the ads you see in the paper might be for decent companies, but always do your homework and ask thoroughly about terms and conditions before signing anything.

Or, even easier, you could get us to do the homework for you. We don’t like nasty loan sharks any more than you do, and we want to help you get the wheels you need without getting in over your head.

Picking Out A Motorbike (Part 2)

So you’ve decided that a motorbike is a good option for you, either because you want the fun of cruising the highways or the convenience of a form of transport for one that uses less fuel than a car does. And you’ve checked out what you need in the way of licences. You’re ready to organise a motorbike loan, you’ve saved the deposit and you’re ready to start shopping.

You probably already know that not all cars are created equal and the same goes for motorbikes. If you run your eyes over what’s on offer at your local car dealers, you’ll see a number of different styles of vehicle with four wheels: hatchbacks, sedans/saloons, stationwagons/estates, sports cars, coup’s, convertibles, four-wheel-drives, utes, SUVs… the list of body styles and specs seems almost endless. While motorbikes don’t come in such a wide range of styles, there are different types out there. If you’re going to all the effort of taking out a loan to purchase a motorbike, it’s wise to do your homework and choose the right bike for you.

So what’s out there?

  • Scooters: Scooters are the smaller type of bike and are suitable for people on a provisional licence.They’re great for city running and if you just want a nice cheap way to get about, a scooter may be all the bike you need. Think the classic Nifty 50 (Honda 50) and the little Italian Vespa types. You can also pick up electric-powered scooters that reduce your petrol bill to nil  although they do bump up your electricity bill. Scooters aren’t built for speed but for compactness, but even so, a good scooter might make a good addition to a commercial fleet if you want an in-house courier to negotiate heavy traffic (scooters can glide along the side of queues) to get documents, samples and lab results across town quickly.
  • Cruisers: This is the bike you need if you’re planning on going on long journeys and road trips. Cruisers are built for comfort and tend to be bigger bikes. They also tend to have a bit more room for a pillion passenger and a variety of saddlebags for carrying the gear needed for overnight trips. Harley-Davidson is the iconic type of cruiser, but BMW also makes some very comfortable and reliable cruisers  police forces in various parts of the world have used BMW bikes for their motorbike fleets. Needless to say, you need a full licence to ride one of these, as they tend to have bigger motors.
  • Dirt bikes: These are designed for off-road use in rough conditions and usually have juicy suspension and heavy studding on the tyres. They’re not the best choice for on-road use, but if you live in one of the remoter parts of Australia and most of your roads are gravel or you do a lot of off-road running, a dirt bike might be the best option for you. Some dirt bikes are designed purely for off-road use and may not be road legal, so ask the dealer the right questions if you have your eyes on one of these.
  • Racing machines: Definitely not for the learner rider or the inexperienced, these tend to be built for speed and power Kawasaki, for example, makes some very powerful machines indeed. These tend to be heavy bikes with streamlined design. Don’t forget to buy all the safety gear you can to be on the safe side  you might need to take out a larger loan than you would have otherwise to do this.
  • Classic bikes: Triumphs, older Hondas, Harley-Davidsons and other bikes from the 1970s and earlier. These tend to be bought for fun and for sentimental reasons, but they are surprisingly practical and reliable. They tend to have bigger engines (except in the case of very old models that date back to the Second World War) and might not be the best choice for learner riders.

Expect to have complete strangers come up to you and talk to you about your bike if you have a cruiser or a classic, especially if that stranger also owns a bike. This could be another reason for buying a motorbike  it’s a great way to meet people with a common interest.