Luxury Car Loans

Thinking of purchasing a luxury car? Here are some things you need to keep in mind.

Luxury cars come with a high price tag so getting the right loan is important for saving on interest repayments and having flexibility in the loan. Whilst there are numerous car loan lenders for loans under $50,000, options start to decline when going over that amount – especially when you hit six figures.

Luxury car loans are no different from general loans; they are just for a higher amount and require strict proof of borrower affordability – they have serious approval requirements, not to mention insurance as well.

Different Luxury Car Loan Types

Secured Loans

Just like with average car loans, luxury car loans that are secured will allow you to access a lower interest rate, which means you pay less over time. However, should you have issues repaying the loan; the security used in the loan can be repossessed.

Make sure your budget easily allows you to cover all operating costs of the vehicle, not just the loan repayments.

Unsecured Loans

This is the complete opposite of a secured loan where the lender essentially gives you cash. These loans generally have stricter approval criteria and come with higher fees and interest rates. Unsecure loans can be harder to come by as they are classified as a riskier loan as there is no security attached to them.

Business Car Loans

Many people need luxury cars as part of their business and there are loans specifically catered to these individuals. According to how successful your business is, you can secure low interest loans that will enable you to pay the least amount of interest. These types of car loans will also come (usually) with no deposit required. There are numerous advantages to purchasing a vehicle through a business.

Chattel Mortgage

Chattel mortgages are like house mortgages but for you luxury car instead. Similar to the secured loan type, your car is used as collateral should you not be able to meet your repayment obligations. You will have access to low interest rates but at the risk of your assets being repossessed.

Dealer Financed

Many car dealers and dealerships can offer their own financing options through partner providers and this is not different when it comes to luxury car loans. Fixed interest rates and consistent payments over an agreed upon term is the norm for this process and can also provide a balloon payment option towards the end of the loan. Carry out some research before you go into a dealership as you will have little time to weight the options. Always be prepared and at least know a little of what the dealers are talking about.

 

Comparing Luxury Car Loans

Variable and Fixed Rate

As with all loans, luxury car loans come with both variable and fixed interest rate options.

Fixed Rates – will remain the same for the duration of the loan, regardless of whether the interest rate rises or falls over the loan period. It is a great method for meeting your budget but comes at a higher rate.

Variable Rates – provide much lower rates initially but could rise exponentially over the period of your loan. Having said that, the interest rates could fall, enabling you to pay less than what you had initially been required to. Weighing your options is a based on your own comfort levels.

Loan Duration – the general rule of thumb is that most providers will supply options of anywhere between 1 to 7 years on fixed rate loans and 7 years for variable rate loans. Remember that short loans are always the better option so you end up paying less in interest over time.

Associated Fees/Costs – there are often many fees involved with applying for and being granted a loan; items such as administration fees, additional or early repayments, and exit fees. Make sure you research all the provider’s policies on their loans and figure out whether they will work for you or not.

Things to Keep in Mind

The luxury car tax is something that you will have to remember when taking on a luxury car loan – be sure to add this expense into your total car cost/budget. Some lenders already provide this in their loans, be sure to ask for its inclusion during negotiations.

Insurance is another key consideration when purchasing a luxury car. Depending on the make, model and cost, many national providers won’t insure the vehicle. You may have to use a specialty insurer which will come with a premium price. Be sure to contact your insurance company to see if they will insure the vehicle you are considering.

In addition, it may be good to shop around for the best insurance policy, looking at the total cover and not just the price.

Applying for A Luxury Car Loan

The application process is no different than any other loan. Simply apply online or in your lenders nearest branch. General criteria includes; you must be over the age of 18, be a citizen or permanent resident, have a good credit rating. Further information and documentation may be required, such as:

  • Proof of your identity such as driver’s license, passport, medicare card etc.
  • Contact and personal details such as date of birth, full name, etc.
  • Details of your assets, credits, liabilities, and debts.
  • Relevant details of your employer and superior to assess your application.
  • Relevant business details (if a business transaction).
  • Car details such as make, model, year, etc.

Frequently Asked Questions

Price and make often influence the vehicle classification. Speak with your lender and insurer to understand their criteria/classification.
In many instance yes the lender will require adequate insurance before approval. Not any general cover will do.
In many instances yes as you have reduced the risk to the lender. However, each lender is different and have their own lending criteria.
The approval process is no different from any other financial loan. If you have all your documentation in order, it can potentially be approved in the same day.