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.

Bad credit?

So you think that because you blew it once upon a time that you’re never going to be accepted for a loan again? And now you’re in need of a new set of wheels? What are you going to do? Do you have to sell nearly everything in your house that isn’t nailed down, including the cat, so you can raise the funds you need to get from A to B without hassle, or live on baked beans for a month?

Well, maybe, although your friends might object to some of the results if you do live on baked beans. Every little bit helps, especially when you’re trying to collect the funds for a deposit. But don’t sell the cat just yet  you might be able to get a loan in spite of having a less than stellar credit history.

However, as always, let the buyer beware. This doesn’t mean taking all the precautions that everybody should to avoid buying a right dunger of a car. You also need to be cautious before you sign on the dotted line for any loan. Don’t rush into anything, even if you think that this is your only chance. Trust on this  you’ll be better off taking the bus or biking for a few weeks than letting yourself in for years of financial misery.

One thing that you have to be prepared to put up with if you have got a bad credit history is that you are likely to pay interest at a higher rate than your friends with better histories. However, this rate shouldn’t be excruciatingly higher than the good rate  if the good rate is about 9%, then the naughty person rate should be around the 1112% mark, not 20+%. Ask the questions if you have to (or get us to do it).

And regarding questions, be sure to ask about anything that you’re not sure about.Clarify anything and everything  there’s no such thing as a dumb question when you’re trying to understand a loan, and if the person you’re dealing with disrespects your question or doesn’t answer it, walk away and take your business elsewhere. To take one example, if there’s something about the money going from your account to theirs when making repayments on the 30th of the month, what happens on February? Are you going to cop a penalty for being late if the payment comes through on the 1st of March?

One thing that you should never do is to agree to anything that involves a loan approval fee. This means that you have to pay to submit the loan application, whether if it’s successful or not. Guess how these companies make their money!Sure, most companies have a loan processing fee (paying the pen-pusher who does all the paperwork) if a loan is accepted, but a fee just to apply? Get real  and go somewhere else.

If you haven’t got the best credit history, don’t despair. There’s always hope and you can get a loan. Talk to us if you have any questions or if you want a bit of help. We’re here to help you get the best deal for a car loan.

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.

Picking Out A Motorbike (Part One)

We don’t just deal with car loans here at Fincar. We also process plenty of applications for motorbikes as well. Whether you’re getting two wheels for business or for pleasure, a motorbike has plenty to offer in the way of fun and for fuel-efficiency. But what do you need to look out for if you’re buying your first motorbike?

The first thing you have to make sure that you have before you apply for a motorbike loan is a motorbike licence  duh! You’re going to look pretty silly if you go down to the dealers, loan all approved and ready to go, only to find out that you can’t drive the thing home. Alert readers might have spotted the Catch-22 situation here: you need a motorbike to pass the practical licence test but you can’t ride the bike out of the dealer’s yard without a licence.No worries.You can sit a theoretical test and get a learner’s permit, as long as you’re over the right age (which, presumably, you are if you are considering taking out a loan and reading this  although some younger readers and potential riders might think about getting loans from the First National Bank Of Mum And Dad).The age does vary from state to state you have to be 16 to get your learner’s permit in South Australia but you have to be 17 to get the same bit of paper in Western Australia  check the regulations for where you live.Don’t forget to attach your L-plate before you ride away, and if you’ve never ridden before, get someone to show you how to ride (another duh! statement).Also don’t forget to include the price of your helmet and other safety gear when you apply for that loan.

Your licence will determine the sort of bike you have. A person holding a learner’s permit (and those who’ve been riding for less than 12 months) can only ride motorbikes with under 250cc engine capacity but there are a few exceptions, as some motorbikes are pocket rockets that can twist a huge amount of power out of a small engine, and these are on the No Way list for those with an R-Date licence (also known as an R-E licence).Later on, you can get the bigger bike with 250+ cc. Often, we see people applying for motorbike loans when the time comes for the big bike, as these are often more expensive (it’s easy to pick up second-hand <250cc bikes at a reasonable price  people who have bought the new big bike often sell the old one, or else they try to sell the small bike so they can use the money as a deposit on the new one).

Mopeds are a different kettle of fish altogether. Mopeds have an engine capacity of under 50cc and can’t work up any speed over 60 km/h. Some mopeds can best be described as a cross between a regular pushbike and a motorbike. They’re not as common as regular motorbikes, and we hardly see anyone coming to us so they can take out a loan for a moped!

But what do you choose when you pick the big one? Are all bikes created equal or are there different sorts for different purposes, similar to what happens with cars. And do you have to go to a larger bike at all ? This is a bit more complex and will take another post to address properly.