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Aboriginal Car Loans

If you are an Indigenous Australian (a person of Aboriginal or Torres Strait Islander descent), you may be wondering if you qualify for any special types of car loans.

Read on to find out if you do, as well as answers to car finance FAQs.

It’s important to have at least a basic level of financial literacy to avoid being exploited by the actions of unscrupulous car dealers and finance companies.

For example, the recent Financial Services Royal Commission heard evidence that car dealers target Indigenous Australians in remote communities with high interest loans.

We’ll explain how you can boost your financial literacy at the end of this article.

 

Can Aboriginals get interest free loans?


Interest free car loans sound too good to be true. That’s because they are, even though it’s possible for both Indigenous and non-Indigenous Australians to get them.

You may be able to find interest free car finance advertised (especially by dealers), but be wary. The cost of the finance will usually be built into the price of the vehicle. The price may be higher, or you may be charged ‘fees’ instead of interest that you have to repay.

Make sure you read the fine print of any interest free finance offer. The interest free period may only be for a limited time, and after that, you may pay higher than market rates.

You might find that the interest free loan term is shorter than standard car finance terms. That’s because the dealer or finance company will want their money back quickly. You might also have to make a large balloon payment at the end which could be difficult (or impossible) for you to afford when it’s due.

 

Car loans for Aboriginal people


There are no specific car loans available for Aboriginal people in Australia, unlike there is for home loans.

Instead, all Indigenous Australians can apply to a lender like a bank or finance company, just like non-Indigenous Australians can. You need to demonstrate to your lender that you can afford to make your repayments to get your application approved.

 

Aboriginal car payments


Your loan repayments will depend on:

 

  • how much you borrow.


The more you borrow, the higher your repayments will be, and vice versa.

 

  • the interest rate.


The higher the interest rate, the higher your repayments will be (and vice versa).

It’s important to understand that most loan products will have two interest rates on them: the nominal rate (a lower number) and the comparison rate ( a higher number).  Always look at the comparison rate because it is the real cost of the loan. It includes the interest rate plus any lender fees. The nominal rate only includes the interest rate.

Lenders in Australia are legally required to tell you the comparison rate before you take out any finance.

 

  • your repayment schedule.


Standard car loan repayments are monthly, but you can arrange fortnightly or weekly repayments. You should arrange your payment schedule to match your income schedule to make budgeting easier. For example, if you get paid fortnightly, arrange fortnightly direct debit car repayments.

 

  • your loan term.


Standard terms for car loans in Australia range from 1 to 7 years. The shorter

the term, the higher the repayments. In other words, you can lower your  repayments by taking out a longer term.

 

How do I get a car loan?


There are three basic ways to get a car loan:

1) apply with a lender directly.

This can be time consuming and confusing. There is a huge range of lenders in the Australian car finance market. Finding the best deal can be tricky if you don’t understand car finance jargon like ‘comparison rates’, ‘balloon payments’ and ‘residual values’, ‘secured loans’ and ‘unsecured loans’, chattel mortgages and finance leases.

 

2) use dealer-arranged finance.

This option should be avoided at all costs. Dealer finance is expensive. Don’t let yourself get talked into just for the sake of convenience. If you do, you’ll end up paying a lot more.

 

3) work with a car finance broker to arrange the loan on your behalf.

Car finance brokers work for buyers, not for dealers or lenders. They are on your side and their goal is to find you a great deal.

 

Types of car loans


There are a range of different finance options available for both Indigenous and non-Indigenous Australians, including:

  • secured loans


These loans have a lower interest rate because your car is the security for the finance. But it’s important to understand that a lender can repossess and sell your car if you don’t make your repayments on a secured loan.

 

  • unsecured loans


These loans have a higher interest rate because you don’t have to provide your car as security.

 

  • fixed rate loans


The interest rate remains the same for the term of the loan (or for a defined part of the term).

If market interest rates rise or fall, your rate will stay the same. This means your repayments will stay the same.

Fixed rate loans can make it easier to budget for your repayments because they won’t change.  Almost all car loans are fixed rate loans.

 

  • variable rate loans


The interest rate moves up or down based on market interest rate movements. If interest rates rise, so will your repayments. But if they fall, your repayments will as well.

But interest rates in Australia are currently at record lows, they can’t fall much further.

 

  • chattel mortgages


A chattel mortgage is a secured loan for a business vehicle.

 

  • finance leases


A finance lease is another option for paying for a car through a business. Instead of paying for the car upfront, you agree to make lease payments for a defined term. At the end of the lease, you usually have the option to buy the car or simply hand it back and lease another one.

 

Applying for a car loan


Any lender will want to make sure you can afford your repayments to approve your loan.  You will usually need to supply the following information when you apply:

  • details of the car you want to buy (including its make, model, year of manufacture and market value).

  • proof of your regular income, identity and current address.

  • details of any other assets or debts that you have.

  • a budget of your regular expenses.


A lender will check your credit score when assessing your application. The better your credit score, the better your chances of having your application approved.

You will have a good credit score if you have a good record of paying all your debts on time. This includes any loans or credit card debt that you have, as well as mobile phone and electricity accounts.

 

It’s a good idea to check your credit score before you apply for a loan. You can check  it online for free.

 

But if you find that you have a bad credit score, it’s still possible to get a car loan. You should talk to a finance broker for advice.

 

What benefits am I entitled to as an Aboriginal?


Both Indigenous and non-Indigenous Australians are entitled to a range of financial benefits for specific circumstances, including:

  • family payments

  • older Australian payments

  • disability payments

  • carer payments

  • youth and student payments

  • job seeker payments.


If you’re eligible, these benefits will help you afford your car loan repayments. You can check your eligibility online by answering a few simple questions.

 

Aboriginal financial literacy and car buying advice


The federal government publishes a range of resources that can help you with financial literacy on its ‘moneysmart’ website. There are also specific resources on the site that have been designed for the needs of Indigenous Australians.

In addition the Australian Competition and Consumer Commission (ACCC) publishes a ‘Be Smart – Buy Smart’ guide  that provides car buying tips as well as general advice about your consumer rights. Their car buying tips include the importance of:

  • finding the best deal if you’re taking out a loan.

  • talking to a financial counsellor or respected member of your Indigenous community (such as an elder) for advice before signing anything.

  • making sure you understand any documents you sign and any financial commitments you are making. If you don’t, ask questions until you do.

  • getting a satisfactory mechanical inspection done on a second hand vehicle before you buy it.

  • buying from a licensed dealer for greater protection if you’re buying a second-hand car (such as a warranty and a cooling-off period). You won’t get any additional legal rights if you buy your car from a private seller.

  • avoiding buying a car that’s too old. If you do, it will probably need more costly repairs and maintenance faster than a newer car will.


If you decide to buy a second hand car privately, make sure you check the Personal Properties Security Register to make sure there is no money owing on the vehicle. If you don’t, you could become responsible for the previous owner’s debt.

 

The bottom line


Buying a car is a big financial decision, so it’s worthwhile getting some advice to help you make the right decision. That includes professional advice if you need finance to buy your vehicle.

 

How we can help


If you’re looking to buy a new or used car and you need finance, talk to our expert brokers at Auto Car Loans. We can help to find you a great deal and save you the time and hassle of doing it yourself.

We arrange car finance from a panel of over 50 lenders. We work for car buyers, not for dealers or lenders.

Find out more by calling 1300 301 051 during business hours to speak with one of our experienced car finance brokers.

DISCLAIMER : The thoughts and opinions conveyed on this website are those of the authors only and are of a general nature. This does not constitute financial or general advice to you from Auto Loans Group. You should seek your own independent advice from a professional which is specific to your circumstances before considering any of the items referred to in this article, including finance, insurance, and car buying.