Car finance: it’s time to jump on the bandwagon

New figures from ABS show record vehicle sales at record levels and affordability has never been better

Car finance: it’s time to jump on the bandwagon
New figures from ABS show record vehicle sales at record levels and affordability has never been better

Vehicle sales and affordability are at record levels, new figures by the Australian Bureau of Statistics reveal.

Sales rose by 4.5% in December, the biggest rise in almost six years; across 2017, sales were at record highs. 

According to CommSec, affordability “has never better”, even without adjusting for the improving quality of vehicles over time. A worker on the average wage needs just 23.2 weeks of wages to buy a Ford Falcon, down from 26.7 weeks of wages, five years ago.

The figures provide further impetus to brokers considering entering car finance. Figures from early 2017 already showed car sales well ahead of home loans; around 100,476 new cars are sold per month, compared to 86,250 loans, and car sales have increased since then. 

Speaking to MPA last year, ANZ’s third party asset finance head Trent Cummings told MPA brokers should not underestimate the opportunities in car finance: “for every household there is – and I’m trying to be conservative here – 1.65 cars, so for every two home loans you do there’s three cars available to you.” 

ASIC gives brokers edge over car dealers

2017 was also a turning point for car finance, as ASIC banned flex commissions (effective this year) for car dealers, removing a major advantage for dealers providing finance.

The move coincided with a major scandal in which BMW Finance was forced to refund millions of dollars in loans after it beached responsible lending provisions.

Brokers, who have access to more sources of finance, now have an advantage in both pricing and prior client relationships. 

Dealers won’t go away, however, and may look to acquire ACLs and diversify into other types of lending, warns ANZ’s Cummings. “They’ve got the customer there, they’ve got the asset finance there, the ability to go and actually do their home loan, and these guys are very good at finance.”

How to prepare your brokerage

Car finance needs to be carefully introduced into a brokerage to avoid disrupting home lending, advised one broker MPA spoke to.

 “Car finance is a different game,” explained Liz Wilson, of Wilson Financial in Bowral, NSW. “You need to be thinking on your feet and be able to process the deal in under 24 to 48 hours because your client wants their car straight away.” 

Wilson employs a dedicated equipment finance processor because of the very different time scales demanded by mortgage and asset finance. She also offers a car buying service and has strong relationships with local businesses, which often require vehicles.  
 

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