Dealer finance offers, typically with a low advertised rate, are marketing tools used by sellers during EOFY sales and other times to attract buyers. When these offers appear around sale time such as the end of the financial year, the price of the goods may not be reduced. The manufacturer or dealer is using the loan offer as a discounting tool instead of a price cut.
These offers are seen across many markets – motor vehicles, trucks, machinery and equipment. While these offers may appear attractive, as specialists in asset financing, we advise buyers to cover off closely on the details and compare any offers with what we can achieve for them.
What is Dealer Finance?
Dealer finance is credit offered at the point of purchase. It may be through the dealer or through the manufacturer of the product. Loans are provided through a credit partnership with the dealer or the manufacturer.
Typically, these types of offers advertise a low rate of interest and have set terms and may have eligibility criteria. Deals are usually advertised on specific models but may be a range-wide, or brand-wide offer. These types of deals may appear at any time but are often used during EOFY sales and other clearances as an alternative to a price reduction on the goods.
Questions to Ask of Dealer Finance
EOFY sales time can be frenetic, especially for business operators. You want to secure assets while lower prices and offers are available. But you still have to keep running the business and covering off on all the other details associated with the end of the financial year.
If considering accepting financing offered at the point of purchase, consider a number of key aspects of the financing:
- Does the deal include all asset financing facilities?
Assets can be financed with Lease, CHP, Rent-to-Own and Chattel Mortgage. Businesses select the facility that is best suited to their accounting method, balance sheet approach, preference for ownership, tax strategy, and overall financial objectives. If an offer does not provide the choice of the facility that is right for you, it may not be the most workable loan for your business. - Does the interest rate advertised cover a complete fixed term?
This is a critical issue which must be addressed. Many point of purchase loans include what may be considered as a ‘promotional’ interest rate. The rate applies only to a set period of the loan term. After that time expires, a much higher rate is applicable. Our asset finance does offer a fixed rate that applies across a full fixed term. - Is the lender specifically selected to suit your business profile?
The answer to this question is usually no. Unless the credit partner is a finance broker, point of purchase loans are arranged through the credit partner which is usually a finance company. - Some businesses will have specific profiles that do require specialist lenders.
For example, not all lenders will offer loans to businesses that have traded for less than 12-24 months or who do not have full documentation or who have bad credit. Having a large choice of lenders ensures the most suitable loan is obtained. - Will the loan term and any balloon be negotiated to suit your cash flow and repayment expectations?
This will very much depend on the credit partner and any leverage that the manufacturer or dealer offering the financing has with that lender. Some of these types of offers do cite a specific term which can be shorter than the up to 84 months which we can negotiate for many businesses. Shorter loan terms mean higher monthly repayments. If the term offered does result in a monthly payment that does not work with your cash flow, then it is likely not the most suitable option for your operation. - What businesses are eligible?
The criteria for the loan offer should be checked to ensure your business does meet the eligibility requirements. - Is the loan offer available for sole traders, new businesses and start-ups?
In other words, is a Low Doc or No Doc option available? As touched on above, not all lenders do offer these opportunities which are available through our expert brokers.
Compare Our Competitive Asset Finance Offers
Whether our customers are purchasing during EOFY sales or at any other time, we focus on always securing their most competitive rates and personally negotiating terms and payment schedules to suit their business objectives. Loans are sourced from a large lender selection, including lenders that specialise in key markets such as heavy vehicles and heavy equipment.
Requesting a quote from our experts does not include an obligation. Request a quote and/or secure pre-approved financing so you are ready to capture discounts at EOFY sales and have a loan to compare with any dealer finance offers.
For competitive asset finance to compare with dealer finance during EOFY sales, connect with Business.Finance brokers on 1300 000 033.
DISCLAIMER: THE SPECIFIC PURPOSE IN PROVIDING THIS ARTICLE IS FOR GENERAL INFORMATION ONLY. IT IS NOT INTENDED AS THE SOLE SOURCE OF FINANCIAL INFORMATION ON WHICH TO MAKE BUSINESS FINANCE DECISIONS. BUSINESS OWNERS WHO REQUIRE ADVICE OR GUIDANCE AROUND THEIR SPECIFIC FINANCIAL CIRCUMSTANCES ARE RECOMMENDED TO CONSULT WITH AN ADVISOR OR ACCOUNTANT. NO LIABILITY IS ACCEPTED IN REGARD TO ANY MISREPRESENTATIONS OR ANY ERRORS RE ANY DATA, SPECIFICS, POLICIES AND OTHER INFORMATION AS SOURCED FROM OTHERS.
