Why is car finance cheaper with small companies than the big banks?
When you’re getting car finance, it can be overwhelming when faced with the number of institutions offering loans and leasing options. From big banks, to small boutique companies, you need to figure out which provider will give you the best option for car finance.
Many people find that small companies can offer car finance that is cheaper than that offered through the big banks. There are a few reasons for this but it’s always worth doing your research and finding out the best option for you.
What is a small lender?
Generally, small lenders (or small companies offering car finance) are any of the financial institutions that aren’t the big 4 Australian banks. If it’s not ANZ, Commonwealth, NAB or Westpac, the car finance provider will generally be considered a small lender.
Small lenders are often credit unions, building societies and non bank lenders.
What are the advantages of getting car finance with a small company?
It’s fairly common for small lenders to be able to offer lower interest rates and fees for car finance.
Generally, this is because they have lower costs – usually being online rather than traditional high street bank branches who need to pay rent.
Small lenders are focused on providing value for their customers – and they know there’s a lot of competition out there with lots of small lenders offering a number of car finance options.
Another great thing about small lenders is that you’ll generally have a more personal relationship and could experience better customer service. They’ll often approve loan applications faster (purely because they have a lower volume of applications than the big banks) and you can speak to someone directly on the phone far more easily.
Small companies offering car finance sometimes give more flexibility with your loan and the terms or the conditions of it. They may operate in your local area and you may be able to drop in and meet them face to face to discuss your needs.
Are there any disadvantages of getting car finance with a small company?
Yes, there are always pros and cons to both options which it’s really useful to be aware of when choosing the right car loan option for you.
Small lenders are often slightly more limited in the loan options they’re able to give to customers. This is simply due to less resources often. It’s also worth bearing in mind that a small lender may not be as able to offer discounts or have sales on car finance as a big bank may do.
Do your research
If you’re nervous about using a smaller lender, do your background research on them or ask for expert help to understand how they operate and how other users have found them to be.
Very new lenders may be a slightly risky choice so always go for a small lender who is well established and has some kind of reputation to show for their work.
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