Broker or dealer’s finance? Who should you use?

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When you purchase a car from a dealer (or a boat or other asset) – be it a franchise dealer or a medium sized, non-franchised dealer; you will be offered the option to engage the services of the dealership business manager to help you with financing your purchase.

Often it can be tempting to use the services of the dealers, because you could be driving your car sooner.

But you should consider many factors and look to ask addditonal questions before you commit. Here are just a few considerations before you make your final decision:

  1. Many business managers in the dealerships are unlicensed finance operators. Being licensed would impose more onerous requirements on their processes, such as Responsible Lending obligations and Best Interest Duty. A licensed finance broker is required to meet these obligations under their Credit Licenses and these are all designed to protect the consumer.

    Licensed finance brokers have the following obligations under their licensing requirements:

    • To operate in the consumers best interest under the recently implemented Best Interest Duty (2021).

    • Abide by the Responsible lending obligations under the NCCP Act (2009).

    • Keep up to date with industry and lender policy.

    • Continuous industry training requirements.

    • Criminal and Bankruptcy checks on operating Brokers, ensuring credibility before they enter the industry.

    • Ongoing compliance to the Credit Licensees compliance frameworks inposed by ASIC.

    • Members of the Australian Financial Compliants Authority (AFCA).

    • Members of a recognised Industry Body – the MFAA or FBAA.

  2. driving your car sooner can sometimes cost you in the long term. Often a Dealer or Broker will encourage you to finance through them for a quick outcome. So you can drive the car the same day. When you purchase a new or used car, you naturally want to drive it as soon as possible. The new car smell is just too tempting to leave behind for another few days. But you need to do your homework! Signing up on the spot could cost you $ 1000’s of dollars over the term of the loan. Take your time, don’t be rushed and control the process.

  3. Post settlement service is just as important as pre-settlement service. Finance Brokers generally embrace the “client for life” approach in their business models. So before making a decision ask the Dealer and the Broker what post settlement service they provide.

    If you have an issue with your loan during the loan term, you need the peace of mind of your broker or dealer being only a phone call away. The service should not end when you take the car and sign on the dotted line. Finance Brokers are mainly small business owners who build their businesses on excellent service. They should be available to you for any questions or concerns you may have after the loan has settled. Ask the Dealer if they provide a similar service.

It is also important that you take your time with accessory purchases. Make sure you shop around for all aspects of the purchase, not just the car itself. The after sales accessories (such as tint, protection packages, tow bars), extended warranty options and the finance are all important. We have seen clients who have overpaid for the car, the accessories and the finance package. It all adds up in the end, and the extra cost can be life changing.

Take your time, remove the emotion and control the purchase so you get the right deal for you. It will be worth it!

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