A car finance broker or a car loan broker is an accredited individual or company that has access to a range of lenders to help people find a car loan that suits their needs. Instead of seeing just one lender with their own loan products, brokers can look for loans from many different and independent lenders at the same time. Brokers can save money and time for people looking for car loans as they search for the best deal on the car buyer’s behalf. They can also look for competitive rates and terms for bad credit customers, loans with pre-approval, and for business customers looking for a car loan.
Every car loan broker in Australia should be accredited by the Australian Investments and Securities Commission (ASIC) with an Australian Credit Licence (ACL.) A broker’s ACL shows consumers that they follow responsible lending rules as laid out in the National Consumer Credit Protection Act 2009.
You can check a broker is accredited using the ASIC Register. If your broker is not accredited, walk away.
According to the Act, credit licensees “must not enter a contract with a customer, suggest such a contract, or assist a customer to apply for a credit contract if that contract is unsuitable for that customer’s situation.”
This means that a broker, once they have made a preliminary assessment of your creditworthiness and find that a loan is not suitable for your financial situation, should not approach their lending panel and submit your details for an application. The lender will make a credit check and could reject your application, which has the potential to harm your credit score.
Brokers should adhere to the “three pillars” of responsible lending, which are:
|Lender||Product Name||Advertised Rate||Comparison Rate||Monthly Repayment|
|Savvy||New Car Loan|| 2.99% |
|Bank of Australia||Used Car Loan|| 6.45% |
|ANZ||Online Secured Car Loan|| 7.85% |
|CUA||Fixed Rate Car Loan|| 7.99% |
|BankSA||Secured Fixed Personal Loan|| 8.49% |
|St George||Secured Fixed Personal Loan|| 8.49% |
|CBA||Secured Car Loan|| 8.49% |
|NAB||Variable Rate Personal Loan|| 14.19% |
* Commercial loan with the loan amount of $40,000 is looking at a 5 year secured fixed rate of 2.85% p.a. and comparison rate of 3.93% p.a.. WARNING: all fees and charges may not be included on the example above, only the comparison rates, monthly repayment and total cost applies. Therefore, the total cost of the loan might be different. Comparison rate do not include broker fees, redraw fees, early termination fees and fee waivers. Comparison rate may change as a result of the different loan terms, fees and the loan amounts. Establishment fees and monthly fees do not apply to commercial loans, only consumer loans. However, there might be different fees apply.
Buying a car is a major financial decision. Getting your finance sorted should be a research-intensive process, where you set your budget, figure out how much you can afford in repayments, and find a loan that suits your needs. However, with thousands of loan products on the market, it could take you weeks, if not months, to sort through all the different alternatives before you find one that suits. In most cases, you’ll choose one that costs you more or has fewer features than another loan on the market.
A car finance broker works for you in finding a car loan deal that suits your budget, needs, and set of features. This could be finding loans if you have bad credit, need pre-approval, a balloon payment, or any other type of specialised loan such as one for auction-based car sales or chattel mortgages for business.
Brokers have access to what’s known as a lending panel. A lending panel is a range of lenders or banks that offer their products to the broker. The broker, depending on how they operate, look for loans that suit the budget and needs of the applicant. This can be done manually, through a computer, or with the aid of artificial intelligence. The lending panel will return their available products, which the broker will present to the applicant.
A broker is an intermediary between a car buyer and a lender and handles all the paperwork and application process on the car buyer’s behalf.
Some brokers may charge a fee for their services, which is included as part of the loan. This may be expressed as a comparison rate. A comparison rate is the base interest rate and most fees and charges associated with the loan expressed as a percentage.
Other brokers may not usually charge a fee for their services, as some make commissions from the lender for selecting their product. This also means there’s no “penalty” for using a broker over approaching a lender or dealer financier.
A good broker will be upfront with their fee structure and how this plays into your repayments.
Some car finance brokers are also car insurance brokers. Many consumer car loans require the car buyer to purchase comprehensive car insurance as part of the loan agreement.
Some car insurance brokers also offer GAP (Guaranteed Asset Protection) insurance, which protects the car owner if the car is stolen or written-off before the loan is fully paid off. The insurance pays out the remainder of the loan in that case.
Car insurance brokers work in the same way as car finance brokers; they have an insurance premium panel which connects your car insurance premium with available products on the market.
Why looking for car finance through a broker is better than going it alone