WITH the Reserve Bank increasing interest rates going on nine consecutive meetings in a row, financing a car purchase will be a shock for many car buyers that have purchased a car in the past five years.

But it may come as a surprise to car buyers, not so much to those in the industry, that today it is often cheaper to finance a car purchase at the dealership rather than going through the traditional banks.

At Pitcher Partners, we have had the opportunity to work with many of our clients in the retail automotive industry and have seen first hand the benefits of financing a car purchase at the dealership as opposed to going through traditional big four banks.

This is because dealerships have access to a wide range of lenders, including captive finance companies operated by car makers and independent automotive financiers which are affiliated with car manufacturers. These lenders often offer more favourable terms and lower interest rates than big four banks, which can result in significant savings for the consumer.

Furthermore, dealerships also have more flexibility in terms of loan terms and down payments. This means that consumers may be able to find a financing option that better fits their budget and financial situation.

Recently, after the Federal Reserve Bank increased the cash target interest rate for eight consecutive meetings from 0.10 per cent to 3.10 per cent (with the ninth coming in February) we are seeing car loan interest rates from the traditional banks in the range of 10-16+ per cent depending on the borrower. In contrast, dealers have access to loans sub 10 per cent with some captive and independent financiers offering as low as 7 per cent.

Another advantage of financing a car purchase at the dealership is the convenience factor. Dealerships have access to a wide range of lenders and can offer more favourable terms and lower interest rates. It’s always a good idea to shop around and compare the financing options available before making a decision.

Consumers can also complete the financing process at the same time as they are purchasing the vehicle, rather than having to go through the time-consuming process of applying for a loan through a bank.

It’s worth noting that it’s always a good idea for car buyers to shop around and compare the financing options available through different lenders, including both dealerships and banks, before making a decision.

By Steve Bragg