New car finance regulations give buyers the upper hand from November 1
IF you’re about to sign on the dotted line to finance a new car, wait until November 1st.
THE world of car finance changes dramatically from midnight tonight, potentially saving buyers thousands of dollars in loan repayments.
Stricter regulations on finance for new and used cars will give buyers the upper hand on interest rates — and slash the kickbacks paid to dealers by lenders.
Under the previous rules, a dealership was allowed to add hefty margins on top of the lender’s rate in return for a bigger kickback.
According to one example provided by a leading multi-franchise dealer, if the lender’s finance rate was 5 per cent interest but the dealer could sign up the customer at 12 per cent, the dealer could reap a kickback of about $10,000 on a loan for a $50,000 car. That’s in addition to the dealer’s profit from the sale of the car itself.
Under new regulations, dealers will not be allowed to increase the interest rate quoted by the lender — instead they can only use their discretion to reduce the interest rate by a maximum of 2 per cent.