The artificial intelligence (AI) revolution is coming, and it will impact just about every aspect of your life.

AI is also impacting the world of loan brokerage – where you engage a third party to effectively compare all the finance options on the market and find the best deal for you. 

Some brokerages are now picking your loans for you using AI. Future brokerages might offer an AI tool that lets you a finance option yourself – with a human that can assist if needed. Sort of like self check-out at Coles. 

The upside? Theoretically, the cost of paying human salaries is not somehow baked into your car repayments. In other words, AI could make car finance cheaper, although it’s early days.

Early days or not, there are still plenty of reasons why you’d opt for just a human instead. In this article, we explore why.

Why it’s still best to use a human broker for finance

A computer can compare huge amounts of data quickly, but a human still knows the exact questions to ask, what products will be best for you, and tailor a solution – and perhaps even negotiate a sharper deal. At this stage, a robot can’t do all of this.

Things can go wrong if using an AI broker

While there’s no denying a person can stuff things up, a computer can overlook obvious things altogether – and a car loan in which you are entering a legally binding agreement, is not something you want to stuff up.

There’s no doubting future AI tools will become smarter and more powerful, enabling quicker and easier purchasing of car finance – for potentially cheaper. But at least as we write this, it’s still best to engage an expert human broker who can ask you questions and get a sense for your individual needs and requirements – simple as that.

Disclaimer: The information on this website is for general purposes only and not a substitute for professional financial advice. CarExpert recommends seeking independent legal, financial, taxation or other advice unique to your individual circumstances.

Finance Guide

Why getting finance through a human broker is more important than using a digital AI broker

Paperwork is a part of life, and getting finance for something like a car loan is no different. Lenders need documentation to prove your identity, place of address and your ability to repay the loan.

In this article, we break down what you typically need to have prepared before having a crack at a car loan.

Bank statements may also be requested. A business car loan is a different kettle of fish and you may be asked for proof of a registered ABN, assets and liabilities and evidence you are making a profit. 

Other documents you may need at some stage

Depending on what stage of the loan process you’re at, you may be asked to provide a certificate of registration with the vehicle in your name; or a tax invoice for the car you’re purchasing. Ensure it displays the registration number, VIN or chassis number, engine number and agreed purchase price. Make sure you also present a receipt for any deposit paid.

If you’re purchasing through a dealer or at an auction, a lender may request an invoice with the dealer’s ABN and name, your name and the aforementioned details about the vehicle.

A lender may request you have organised comprehensive car insurance prior to proceeding with finance.

Most people won’t need much more than ID and proof of income to apply for a car loan. But making sure you have these ready to go can speed the process up a lot.

Many lenders ensure the paperwork is not a nightmare-inducing situation thanks to modern technology. “We utilise an online service, so you don't need to go into your bank and print it all out,” Head of Marketing at Stratton Finance, Chris Dimopoulos, told CarExpert.

Have everything in order and your next new car could be in your driveway a lot sooner.

Applying for a car loan – make sure you've got those documents ready

A car is often the second biggest purchase you make in your life behind a house – so it’s critical you know what your getting yourself into.

If you’ve decided to get finance instead of paying cash, it also pays – pardon the pun – to ask the right questions before you autograph any contracts.

In this article, we assume you’re already at the stage of organising the finance and are ready to sign. Double check with yourself you’ve asked these questions before signing anything.

Lenders will lure you in with a sharp “headline” interest rate, but it could be bundled in with other loan conditions that mean at the end of the day, the total cost of the loan can be more expensive than at first glance.

Some lenders will charge an establishment fee and a monthly account keeping fee. 

If that’s $395 and $10/month respectively, the very low interest rate is suddenly looking a bit limp.

This is why it’s important to focus on “comparison rate” rather than “interest rate”. 

The comparison rate includes the interest rate plus most fees and charges and is more representative of the total loan cost. It’s worth noting that comparison rates don’t include stamp duty and other government charges (where applicable) nor early termination fees.

Many lenders will sting you with an early termination fee. Even if you think you’ll see out the full term of the loan, it pays to know what this is. You never know when your circumstances may change. Find out how flexible your loan might be if you want to make additional repayments.

It might make more sense to you to pay more over the life of your loan – for lower monthly repayments.

Some lenders will do a deal whereby at the end of the loan, you pay a 30 percent residual payment – a lump sum known as a balloon payment – when, for example, you sell the car. In exchange, over the course of the loan, while your total loan cost might be slightly higher, your monthly repayments will be lower. This is helpful for those where monthly cash flow matters a lot.

A balloon payment may allow you to borrow more, lower your monthly repayments and increase your chances of your application being approved. A broker can advise what kind of balloon payment is right for you.

Don’t be seduced by the sexy low interest rate. Make sure you understand just how much the loan will have cost you by the time you pay off the last dollar. The differences – which are often made in hidden charges – may surprise you.

What do you need to know before signing a car finance contract?

For whatever reason, you’re in a position to settle the debt on your car quickly and easily – doing away with things like repayments and saving yourself the accrued interest. 

Lenders typically hide in the small print of the terms and conditions what information you need to consider which includes any early termination fees. 

You will need to request a payout letter from your lender to confirm the latest balance owing on your loan. 

Once you have these payout figures, you’re set to make your final payment and say hello to 100 per cent ownership of your car. 

How do you find out what the early-exit fees are?

"Contact your lender and find out what the fees are for wrapping up your loan early", is the advice from Head of Marketing at Stratton Finance, Chris Dimopoulos.

“Most lenders will just have a set early termination fee,” Dimopoulos told CarExpert.

“Let's just call it $750. What that means is if you take out a five year loan and pay it out in three years, that $750 is just pro-rata’d."

“That might mean you pay an extra $12, $13 a month and you would just pay that section of the fee as your penalty to pay it off"

It’s worth noting that if your loan is based on a variable rate, you’re less likely to be stung with fees for paying the loan off before its end-of-term. 

Fixed rate loans are more likely to come with early exit fees.

Can you pay your commercial car loan off?

"If you’re an ABN holder and you’re trying to exit a commercial loan for a vehicle you’re using for business use, it’s not quite as easy as a standard consumer loan", explains Dimopoulos.

Dimopoulos says there are lenders who will charge a very low termination fee for exiting a commercial car loan early. 

It’s best to sign up to a car loan like this up front if you think that might end up being you.

Yes. And it’s wise to think about making additional repayments as you’ll end up paying less interest over the life of the loan. 

Simply increase your monthly repayment over the minimum required by your lender.

It’s worth noting that you might be getting charged a fixed interest rate meaning making extra principal repayments will make no difference. 

It’s best to check the fine print of your loan or get in touch with your lender to see if additional repayments will make a difference. 

Most lenders will let you pay out your car loan early with, at worst, an early exit fee. 

Contact your lender to find out what the deal is. And enjoy having a car that’s entirely yours, and being debt-free!

Can I pay off my car loan early?

Deciding how to pay for your next brand new car can be a big decision. Almost as big as choosing the vehicle itself. 

So, you’ve done your research, read the reviews and decided it’s time to buy your next brand new car. 

Because you’re some sort of financial savant, you’ve got the cash in the bank ready to go but that doesn’t mean you shouldn’t look into finance options. 

You might be surprised to learn that there are pros and cons of buying a new car with finance versus cash.

Pro 1: Buying a car with finance is just as simple and easy

Buying a car with finance can be as simple as one, two, three.

Requesting a quote from a broker can take a matter of minutes and gives you time to search CarExpert for the best deals on your brand new car.

After you’ve secured the best price on your new car, the broker will provide you with all the information regarding your finance loan which includes securing your competitive interest rate.

Once your vehicle is ready to be delivered, settlement will occur on your behalf leaving you to focus on driving away with a hassle free experience.

Pro 2: Your cash might work harder for you elsewhere

“Typically if you ask any good investor, your cash should be used to invest in appreciating assets, things that are going to make you money,” 

Head of Marketing at Stratton Finance, Chris Dimopoulos, told CarExpert.

“We love cars, but unfortunately they are the quickest depreciating asset that you'll ever own.”

Cars are a big purchase, and a savvy investor knows something like $30,000 cash could work harder for them in a safe investment – such as a home loan, or investing in the stock market.

For example, you could finance that $30,000 car and repay around $36,000 over five years with current interest rates. Or put the $30,000 into a deposit on a house, which is almost guaranteed to rise in value more than $6000 over the same term. 

You could put the $30,000 into an existing mortgage, if you have one, and save a considerable amount more than $6000 on home loan interest, and pay your mortgage off sooner.

Alternatively, you could use the cash to fund your next holiday, rather than potentially putting expenses on a credit card with a much higher interest rate. 

It’s worth noting, car loans typically offer lower interest rates than personal loans, too.

Pro: 3 You can claim some car loan expenses on tax

You may be able to claim tax deductions related to the loan itself, further sharpening the car finance option versus buying outright with cash – it’s best to check these benefits with your accountant before committing to financing your loan. 

Everything is different and finding what works best for you might not be what works for everyone else. 

Before committing to finance options it’s a good idea to contact your financial advisor or accountant to weigh your options. 

It’s also very important to note the relevant economic situation regarding interest rates including the benefits to keep the cash in the bank. 

If you are still unsure about what option is best for you, Stratton Finance will offer a quote and provide the relevant information so you can make an informed decision. 

Why getting finance through a human broker is more important than using a digital AI broker

Why it’s still best to use a human broker for finance

Things can go wrong if using an AI broker

The takeaway

More Finance Guide