Arranging car finance & deposits

Consider arranging your car finance before you find a car.

This way you will know exactly how much you have to spend, the money will be readily accessible, and you may be able to negotiate a better price if the seller knows you are able to close the sale quickly.

This will also allow you to choose finance that is suitable for your particular circumstances and avoid being pressured into accepting a loan that may not be appropriate for you.

The RACQ Loan Calculator can help you determine the amount you can borrow by estimating fortnightly and monthly repayments.

Never sign a contract ‘subject to finance’ as you may find yourself being pressured into accepting a loan that has been arranged by the dealer. If the sale is conditional on securing finance the clause that should be added to the contract is ‘Subject to the purchaser obtaining finance sufficient to purchase the vehicle from (name financial institution of choice) by (insert date to obtain finance by).’

Be cautious of dealers or financial institutions that claim to guarantee acceptance of all finance applications, as you may find that you pay dearly for using their money.

Dealer-arranged finance may be an acceptable alternative; however, before agreeing to such an arrangement, you should do your homework and ensure that it compares favourably with other finance options.

In particular, you need to ensure that the finance provided by the dealer is on terms and conditions you want and at an interest rate you can afford. Read the loan documentation carefully. If there are any terms which you do not understand, you should obtain independent legal and financial advice before committing yourself to the arrangement being offered by the dealer.

The RACQ Legal Advisory Service provide motoring legal advice to RACQ members and can be contacted on 1800 68 00 50.

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Deposits

Some sellers will insist on a deposit before allowing the vehicle to be taken away for inspection, as this is proof of your intention to buy. A deposit, accompanied by a receipt, is usually deemed to be evidence of a contract. If you are required to leave a deposit, there is generally no set amount to pay. So make the deposit as small an amount as possible.  If you exercise your right to withdraw from the contract under the terms of the Cooling off Period, the dealer is entitled to retain up to $100 of the deposit you paid.  If buying privately, get written agreement that any deposit you leave is refundable should the results of a finance application or vehicle inspection not be to your satisfaction.

If the sale depends on obtaining finance or a satisfactory mechanical inspection, include the following clauses in any contract or written agreement, as appropriate:

• "This sale is subject to the purchaser obtaining sufficient finance from (insert the name of your credit provider) to complete the purchase" and/or
• "This sale is subject to the purchaser obtaining, and being satisfied with an independent mechanical inspection of the vehicle"

Never sign a contract that simply says "subject to finance" as you may be pressured into accepting any finance a dealer can arrange. Similarly, do not sign a contract that says "subject to inspection", as once the inspection has been completed the condition has been fulfilled and you may be pressured to buy the car regardless of the outcome.

Loan Comparison Checklist

• Are there monthly account keeping fees? Is the monthly fee included in the repayment provided – or is it extra?
• Is there a penalty for paying out early? How much is it?
• When comparing loans, look at the repayments. The quote with the lowest interest rate may not necessarily have the lowest repayment (because of the additional fees and charges).
• What payment methods are available and are there additional fees that apply? Eg – Direct debit, BPay.
• Is there an origination fee or brokerage that is payable by me?
• Consider the after-sales service aspect. Mutual organisations exist only to benefit their members.
• If you feel under pressure to apply with a specific provider, ask for time out – walk outside and call someone you trust for an opinion or further information.
  
  Download Checklist (PDF, 610kb)