Tradies or ‘cashed up bogans’ are a welcome sight at most car yards because they are targets of high interest loans and buyers of insurance that they don’t necessarily require.
Tradies finance expert Shane Smith said that over his 20 years in lending he often saw tradies pay too much for their finance and have loans that do not meet their overall needs.
“I constantly get calls from tradies who have been blatantly ripped off and want to refinance into a lower rate facility,” said Mr Smith.
“The tradies’ loans that we see can have interest on them as high as 20 per cent and insurance products on top of that they do not need, or didn’t know they had,” he said.
“Most tradies do not ask what they are signing up for and are often bullied into signing the documentation so they can have the vehicle that day.”
“Finance consultants at some dealerships are instructed to sell or force as much insurance as they can at a high rate to gain the maximum profits, regardless if the client needs it or not.”
“Finance and aftercare accessories income is the most profitable part of the dealership so the consultants are set targets which are unreasonable.”
Mr Smith said tradies should do their research or employ an independent finance broker before committing to any finance contract.
Some of the warning signs to look out for are:
Not all information disclosed: An example of this is on the day the vehicle is delivered the Finance Consultant then announces and produces the contracts with thousands of dollars worth of loan protection insurance that wasn’t previously discussed. They may then go on to say that you cannot have your vehicle today unless you sign.
Interest Rate not Disclosed: By law, the rate on business loans does not have to be disclosed, however if your Finance Consultant has not advised of the rate then ask before signing.
Quick Sign-up of Loan Documents: If your Finance Consultant is rushing you through the sign up of loan documents, slow him/her down and read the contracts carefully.
Low Interest Rate Offers: If it seems too good to be true then it probably is. Read the fine print before you sign as these loans are normally taken over a shorter term meaning the repayments will be high. You also lose the ability to negotiate a discounted price on the vehicle.
Low Doc Loans Attract a Higher Rate: This is not true as most of the Low Doc Business Loans are the same rates as if you were to provide income details.
Mr Smith said that most banks and lending institutions now implemented a points scoring and profiling system for each client and the interest rate was determined by how a client scored.
“Time in job, deposit amount and asset backing are the main determining factors of interest rate,” said Mr Smith.
“You can imagine the calls I get when the tradies finally realise they have paid too much.”
“In some cases we are unable to refinance as the exit and setup costs of the new loan outweigh the benefit of a lower rate loan.”
To discuss your finance needs and see how we can help, give Shane a call on: 1300 175 175