Some history about car finance
Why it doesn’t suit all car buyers
The Big Banks
Vehicle finance used to be primarily sourced through the mainstream lenders like the big banks. These lenders were geared towards home loans so an unsecured personal loan was difficult to obtain and generally took up to 14 days to secure. The main focus of the application was on job security and residential security, if you had anything less than two years in your job or your current address then it was difficult to obtain car finance.
The Specialised Lenders
The second option for finance was through mainstream lenders. Those lenders were specific vehicle lenders and they take security over the vehicle. This relaxes lending criteria but limits the age and conditions of the vehicle you can buy. If you have a default on your credit file it was very difficult to obtain finance through The mainstream lenders. As a result of this, many good people with so called ‘bad credit’ were unable to obtain vehicle finance.
The Car Sales Yards
With limited options some car buyers adopted finance through car sales yards and in many cases had large repayments per week ($120-$150) and large deposits required ($1000-$2000) over a 2 year period for a vehicle that was only worth $5000 – $6000. This leads to problems in the capacity to make payments at key points of the year like Christmas, birthdays, car rego due etc. In many cases if a payment or two is missed the vehicle would be repossessed. This compounds the bad debt cycle and the ability for the borrower to obtain more finance in the future.