The short version
- Carmakers' finance companies sometimes offer very low rates on particular models.
- Compare the drive away price: a low rate can come with less room to negotiate.
- Many offers include a balloon or guaranteed future value at the end.
How carmaker finance works
Most carmakers have a finance company, usually arranged at the dealership when you buy. Their advertised special rates often apply only to some new models, for a limited time, and sometimes only with a balloon payment.
Get a quote from a bank or credit union before you visit the dealer, so you can compare the two on the comparison rate and the car's drive-away price.
Pros
- Low promotional rates on new models.
- Arranged at the dealer, in one place.
- Guaranteed future value options let you hand the car back at the end.
Cons
- Only for that brand's cars, often only new ones.
- A low rate may mean a higher price or fewer extras thrown in.
- Balloons and future value deals add conditions on kilometres and wear.
Alternatives
- A car loan from a bank or online lender, which you can use at any dealer.
- A novated lease, if your employer offers salary packaging. Payments come from your pre-tax pay, which can save tax, especially on electric cars.
- An unsecured personal loan. Nothing is secured against the car, so you can buy any car, at any age, though the rate is usually higher.
How to apply
You can apply for carmaker finance before you've chosen the car. Pre-approval tells you your budget and lets you bargain like a cash buyer.
- Get pre-approval. Many lenders approve you for an amount first, so you know what you can spend before you shop.
- Check your rate. Some lenders give a quote with a soft check, which doesn't show as a credit enquiry.
- Have the car's details ready. Lenders need the make, model, year, VIN and the seller's details before they pay out.
- Compare the drive away price, not just the rate. A low rate can come with a higher price on the car.
- Insure the car. Lenders usually need comprehensive insurance on a car that secures the loan.
What to check on a car loan
Look at the comparison rate as well as the interest rate. The comparison rate adds the lender's standard fees to the interest rate for an example loan, so it shows the cost of two loans on the same footing.
- Whether there's a balloon payment, a lump sum left to pay at the end that lowers your regular repayments.
- Any limit on the car's age, either when you buy it or when the loan ends.
- Whether you can make extra repayments or pay the loan off early, and what that costs.
- Whether the lender pays the dealer or private seller directly.