Lisa Shepherd November 11, 2019 No Comments

Mortgage versus Vehicle or Equipment Finance….

On the face of it, the cheapest form of finance is your mortgage, with standard variable rates averaging 3 to 3.5%. These days, most home loans come with an offset or redraw facility that allows you to make extra repayments whilst still having access to money if you need it.

How easy is this? Redraw $30,000, pay cash for the car (perhaps even after negotiating a discount) then drive off into the sunset!

But there’s a catch. Whilst vehicle and equipment loans (also known as asset finance loans) have one to seven-year terms, your mortgage may have 20 years left to run. And the longer you owe money on your car or plant and machinery, the more it costs you.

Sure the rate of the home loan is lower than an asset finance loan, but let’s have a look at the impact on a mortgage with a balance of $250,000 and 20 years left to run.

At an interest rate of 3.5%, repayments on $250,000 over the next 20 years will be $1,446 per month. Once you borrow the additional $30,000, if you don’t extend the term of your loan, the repayments will be $1,619 per month – an increase of $173. Over the next 20 years, if you are like the majority of Australians and only make the minimum repayments the total you will pay back is $41,520 – a total of $11,520 in interest. Congratulations you’ve just turned a family sedan into a prestige convertible vehicle!

In comparison, an asset finance loan at 5.00% would only cost around $3,833 in interest over five years.

You don’t want to spread the cost of your vehicle or plant and machinery over 20 years – just because you do that with your home loan doesn’t mean that you should do that with your vehicle or equipment. Also, by dipping into the extra repayments you’ve made on your home loan, you’re undoing all those years of hard work making additional repayments and you’re also diminishing the equity in your home.

Another downside can be the fees. Sometimes an additional lend on a mortgage can cost over $600 in establishment fees alone. The bank may also need a property valuation done by one of their valuers. This is often around $200. Then there are legal fees for preparing the new mortgage documents.

Finally, how close are you to borrowing over 80% of the property value? Note the value you think that your home is worth, but what the bank’s valuer thinks its worth? If it’s over 80%, you need to pay for mortgage insurance as well.

Unless your money is sitting in re-draw, the new lend will take on average 4 weeks to complete. This is fine if you have to wait for a car or truck to come in for example, not so much if you’re buying something readily available or require the car or truck to fulfil your work commitments. In comparison an asset finance loan can take on average 5 working days to complete.

Finally using asset finance to purchase a vehicle or equipment for business purposes can offer several tax advantages. Depending on what type of finance you get (i.e. chattel mortgage, finance lease, rental etc.), you may be able to claim your interest or rental repayments or depreciation on the asset – these business expenses can be brought forward so they can be deducted from this year’s taxable income.

If you want to find out more how I can help with your vehicle and equipment finance needs, please contact me.

QV Easy Service Ramps Up for Runout Sales

It was a slow start to the year for the New Car Buyer clearly because everyone was on holidays. Come the last few weeks of January and it’s all systems go.

Quantum’s QV Easy has already saved its clients on average a $7,620 off retail pricing in the last month and not one of our clients had to step foot in the yard! This could be your saving if you are in the market for a brand new car, I mean seriously, who wants to do the running around when you can let the experts do it for you.

Today we priced up the New 2018 Toyota Landcruiser Prado which now has 3 tonne towing capacity! This has excited some potential purchasers so tenders are going out across the dealer network for some amazing savings. So Let Quantum do the leg work for your next new car purchase, it’s so much easier and guaranteed to save you thousands $$ and no stress!

 

What’s the best rate I can get on my car finance?

This is generally the first question we get asked by clients and rightly so. We all want the best rate on our car loan as it’s either the largest debt we have or second largest next to our home loan. In answering this question, we’ll need to ask you a variety of qualifying questions as our lending panel is quite diverse and each individual bank/financier has different lending criteria.

Certain things like the age of the car, the amount you are borrowing, if you are a home owner or renting and is the car for business or private use will all determine the rate. It’s complex, but our role as a broker is to narrow down the lender that best suits your profile and will offer you the best rate for your purchase. Some of our lenders include WPAC, ANZ, CBA, Macquarie, Pepper Asset Finance, Capital Finance and Metro Finance just to name a few.

Are you cheaper than going to the banks directly?

In most instances, yes we are as we specialise in vehicle & equipment lending and have access to a large panel of lenders who compete with each other for your business. Banks often charge higher car loan interest rates because they don’t specialise in car finance. Additionally, some banks won’t fund private sales unless you take out an unsecured loan which means a higher interest rate for you. We also provide very fast turnaround times and work with you to finalise the application to make the process and paperwork easy.

Need help tracking down the best car loan? Call us on 1300 759 870 or email info@quantumfswa.com.au

Things to consider when buying a company car

What name should I purchase the vehicle in?

If the car is in your personal name you can claim a tax deduction on the car expenses where the car has been used for business purposes. If the car is purchased by the company, the company should be able to claim 100% of the annual running costs, depreciation, and interest cost. However, fringe benefits tax will need to be factored in.

Should I buy new, used or certified?

Buying new means higher prices, better reliability, newer features and up to 20% depreciation once you buy. Used means lower initial cost, questionable reliability, low residual value and cheaper insurance premiums. Certified used is the best of both worlds. These are dealer-refurbished cars with low kilometres, one prior driver and reasonably high residual value.

The decisive factor here is determined by your car’s primary use and how long you intend to keep it. If your business needs a vehicle for the long-term then it makes sense to buy a vehicle with high residual value, at the top of its lifespan. If your business only uses a car occasionally, then a used car that won’t gather much wear and tear makes more sense.

Cost of car

Small businesses with turnover of less than $2m are entitled to claim 100% accelerated depreciation on the car cost providing the cost is less than $20,000 (GST inclusive). This is only available until June 2017.

Luxury car tax

If the car you purchased is more than the current luxury car limit (approx $57,500), your tax deduction and GST credit will be capped at this value. Therefore the maximum car depreciation you can ever claim on the car will be capped at $57,466 and the maximum GST credit allowed is $5,224. Therefore, there is no great tax or GST benefit in buying a car over the luxury car limit.

Fuel Economy

If you are paying for your employees fuel as well as the car, you’ll want to choose a car that is relatively economical to run.

Don’t forget, it’s always a good idea to consult a financial professional before making any purchases.

 

Get an instant $20K deduction in your tax return this year

Now is a great time to purchase a company car if you’re a small business. The government brought in some great tax benefits for small businesses a few years ago and they’re about to run out.

If you purchase a car (or any asset for that matter) that costs under $20,000, you can reduce your taxable income by that amount immediately, instead of depreciating it over time.

Previously, you were only able to depreciate 15% of the cost of a new asset in the first year (and 30% in subsequent years). This means if you purchased a car for $20,000 you could only deduct $3,000 off your taxable income in the first year. At the moment you can deduct the full $20,000.

But not for long! These incentives are set to run out in June 2017.

Of course if you do decide to purchase a new company car, we can help you finance it with low rates and great loan features.

You can read more about this on the ATO website:

https://www.business.gov.au/info/run/finance-and-accounting/accounting/depreciating-assets-for-small-business

Beware of low interest rate offers on new cars

While the interest rate on a new car loan is a good indication of whether you’re getting a good deal or not, there are other factors to look out for.

Some deals are sharp and can save you thousands of dollars, whereas some offers, especially those around end of year sales, can lock customers into a big lump-sum payment at the end of the life of the loan. This is equivalent to more than half the original purchase price of the car.

This residual payment is known as a balloon payment and typically should be around 20 per cent of the purchase price, so buyers are not caught out owing more than the car is worth at the end of the loan.

As a new car buyer you need to read the fine print of special offers and make sure there are no hidden extra costs. If you can’t afford the balloon payment at the end of your loan you may have to take out another loan to pay the remaining portion.

Other things you might want to look out for include the loan term i.e. the length of the loan and break clauses within the loan as this will affect the total amount of interest you end up paying.

If you’re not confident you understand the terms and conditions of a new loan, make sure you speak to someone who does. You don’t want to commit to something that you can’t afford.

Always shop around and get more than one quote, and that applies to the purchase price of the vehicle as well as the loan.

Buying a Car Privately or through a Dealer…The Pros and Cons

Considering buying from a dealer or a private sale and confused about which option is better?

Having worked in car yards for 18 years before going it alone as Quantum Vehicle & Equipment Finance I feel I am quite experienced in offering advice to my clients. There are pros and cons with both options and ultimately it’s up to you, the client, as to what you feel comfortable with, but I will do my best to guide you through the maze. If you feel uncomfortable negotiating with a dealer for a brand new car, you should consider utilising my new car buying service where pricing is sourced from various dealers and negotiated on your behalf saving you time and money!

Buying through a dealer Pros:

  • The car comes with a statutory warranty
  • You can trade your car in against the new car
  • The car has a guaranteed clear title which means there is no money owing on it.
  • Dealers have a variety of cars in one location

Cons:

  • Dealer margins mean you can sometimes pay top price as they have to pay advertising, rent, administration and salespersons commission.
  • The aftercare person will try and sell you a heap of extras at inflated prices. Before you know it you have spent thousands more than you budgeted and more than the car is worth.
  • High pressure sales tactics = Impulse buying that can create anxiety after the purchase.

Buying Privately Pros:

  • No dealer margin or overheads saving you more $$$
  • Typically more flexible on pricing as they are keen to move on to their next car
  • No games or high pressure selling techniques

Cons:

  • The car may have money owing on it – so you need to do your PPSR checks
  • There is no warranty
  • You may need to pay for a mechanical inspection for peace of mind
  • No trade in options

If you are looking at purchasing privately, I can assist with Car History reports that show if the car has money owing to a bank, been written off, stolen, had the speedo wound back and the owner history which can provide peace of mind. I can also offer warranties whether they are manufacturer extended warranties or mechanical breakdown warranties for older cars that are out of warranty.

So in closing, I welcome you to contact me via the form to your right if you require further advice or clarification around purchasing and financing your next car. I have access to numerous lenders and the knowledge and experience to find you the right lender and best interest rates for your situation.

All the best in your search for a new car

Lisa

0% Interest Rates – To good too be true?

If it sounds to good too be true, then it probably is!

It is becoming very common to see manufacturers adverting 0% comparison rates on purchases of brand new cars. It is not until you get into the dealership until you find out of any “catches”. This form of finance is referred to as “sub-vented finance”.

What sub-vented finance means is that the manufacturer ie Ford, Holden, Mazda etc will pay back the interest to the financier from the profit of the sale of the car, which means the manufacturer needs to keep enough profit margins from the sale price to be able to cover the loss of interest. This means the vehicle price may not be negotiable, or it can only be discounted to a certain value if you were taking up the 0% finance offer. The finance term is generally shortened to a 36 months with a hefty deposit ie 10%-30%. The reason for this, is the shorter the term, the less interest that is payable by the manufacturer. This is turn means higher monthly repayments for the customer which means they fall outside the banks qualifying criteria which in turn gives the salespeople the opportunity to sell as they normally would, including the car salesman, the aftermarket consultant and the Finance & Insurance Manager (or referred to as the Business Manager).

Quite often the dealership will openly advise you of the difference in prices if you opted to take up the finance offer, or not. A dealership knows that half the sale is getting people into their dealership and then they need to create the urgency when face to face with a customer and they will do their best to get a commitment from the customer before the customer can get home to do their own research.

You will find that very limited information will be given over the phone, as the salespeople are trained to only give what is needed and if the client requires more information, they will have to go into the dealership and speak to the Business Manager.

The 0% comparison rate advertising campaigns are just another way to get people into their dealerships, creating more opportunity for sales. Some people take up the offer and some don’t, but still buy the car from that dealership without taking up the finance offer. This also gives the dealership the opportunity to attempt to upsell other products, such as insurances, warranties and aftermarket products to increase the overall margins.

You also need to be very cautious if you have a trade in, as often this will be used as a tool to retain profit margins, where the dealership will undervalue your trade to make up any other loss, so it is good to go in armed with what a realistic trade value is or better yet, sell it privately if you have the time and patience.

All in all in my opinion, you are better off negotiating the best price and financing your car elsewhere. And if you really don’t want to do the  negotiating then call or email me @ lisa@quantumfswa.com.au and I will do the negotiating for you!

Hello and Welcome!

Welcome to Quantum Vehicle & Equipment’s web page!

I hope you find it easy to navigate and if you have any queries, please don’t hesitate to contact me as I would love to assist you with your Vehicle or equipment purchases.

Regards Lisa

Director – Quantum Vehicle & Equipment Finance