Car Loan through a Broker - Shocking Fees and Charges

LfinanceHell on 02/10/2019 - 11:58

Hi Guys,

Longtime lurker and just created an account.

I am trying to apply for a car loan and based on my circumstances my finance consultant says I only get an approval for a loan of $9K. The thing is that they are quoting fees and other charges of about $1700 in total on top of the loan amount.

this is my first time applying for a loan and am not sure if thats normal. Was looking for opinions based on your personal experiences.

Background -

Employed full time.
Infant at home and S/O on sabbatical.
Fin Broker says credit score good but not very good or execellent.
Minimum FTB payments from centerlink.

TL;DR
Fin Broker says can get car loan for only $9k with $1700 in fees(App, Origination, Brokerage, etc) with around 5.5% rate so will basically pay back ~12,200 at the end of 5 years. Am I being ripped off? Is this they way it is?

Poll Options

  • 27
    Being ripped off - Too high fees
  • 6
    Thats how it works
Financial Car Loan

Comments

  • Baysew on 02/10/2019 - 12:06

    Have you been quoted an interest rate and comparison rate?

  • spackbace on 02/10/2019 - 12:18
    +1

    Nothing to stop you from getting a second quote…

    Fees are where they make their commission, less so on the interest rate these days.

    • financeHell on 02/10/2019 - 12:28

      I am worried about the impact on my credit score as the broker said that its just at good now and one more hit and you shouldnt do anyting for another year. I already have 2 or 3 hits this year.

      I had even asked her to check with other vendors and she said I wont service with any other.

      • spackbace on 02/10/2019 - 12:31
        +1

        Hard to know if your broker is being serious, or trying to force you down a path.

        Yes, borrowing rules have gotten harder. Still might be worth getting a second opinion.

        Though in all reality, those fees won't drop by a huge amount. The worst thing you can do sometimes is seeing how much it will cost to pay back a loan. There's no such thing as a free lunch (except when Toyota had 0%, that had like a $300 establishment fee and that was about it!)

  • Skramit on 02/10/2019 - 12:21
    +2

    Investigate some of the credit unions car loans. Usually very low fees and good rates.

    Sounds like your broker is pushing you towards a particular product for higher kickbacks…… :/

    I recently got a car loan by extending my home loan as some of the financial institutions wouldn't talk to me due to my work circumstances. Has actually worked out far cheaper, with $0 fees, less restrictions on early repayment, and lower interest rate. If you have an existing home loan that is :|

    • financeHell on 02/10/2019 - 12:31

      Yeah no.. I just moved here a couple of years ago and got nothing here.

      As I mentioned in another comment I am afraid I will damage my credit score and it will affect my chances of home loan or anything else in the future. Not that I will be going for one in the next couple of years.. but still..

      • Skramit on 02/10/2019 - 12:34

        Fair enough.

        Remember that getting a loan doesn't necessarily "damage your credit score". Sometimes it can improve it. Dont ask me how the algorithms work but ive seen my Veda score bump up after a successful loan application.

        Showing you can successfully service a loan doesn't hurt your chances of getting another loan in future.

  • sweefu on 02/10/2019 - 12:44
    +2

    I'm a broker and I do car loans.

    On consumer car loans there is generally no commission now, as flex commission was banned.There may still be some volume bonuses paid, but these are generally minimal.

    On a typical car loan I generally see the following fees:

    My Brokerage Fee charged to client, but added onto the loan: $1,100 including GST (paid to my business)
    Lenders Application Fee: ~$350 (paid to lender)
    Lender document Fee: ~$70 (paid to lender)

    Were you provided with a breakdown of the fees?

    • Skramit on 02/10/2019 - 13:18

      My Brokerage Fee charged to client, but added onto the loan: $1,100 including GST

      Is that a fixed amount regardless of loan size? On a smallish loan, it might be a 10% fee! O.o

      • sweefu on 02/10/2019 - 13:37
        +3

        Yes - $1100 is the minimum I will charge for a car loan. It's the same amount of work regardless of loan size.

        I agree that 10% of loan amount is a massive % fee, but the compliance on a car loan is similar to a home loan.

        Once my teams time is factored in, there is approx $350 in profit in a car loan, ignoring other business costs (rent etc).

    • financeHell on 02/10/2019 - 13:23

      Ya I specifically asked for the breakdown -

      $990 Origination fee
      $400 Application fee
      $313 Brokerage.

      I have my doubts about the broker as well as initially I was told I can get a loan on a Learner permit, after sending it in I was told no you cant.
      I was told a month back I service around $12-13K and now they say only 9K because the minimum living expenses(lender side) have increased so the new loan amount cannot be greated than 9K. Hence my questions regarding these other aspects as well..

      • sweefu on 02/10/2019 - 13:38
        +3

        The above fees don't seem unreasonable to me.

        I can't comment on the other info, but there has been a lot of regulatory changes with car loans recently.

        • financeHell on 02/10/2019 - 14:10
          +1

          Out of curiosity.. how recent are these changes? where can I read about them?

        • Lichen6420 on 03/10/2019 - 07:38
          +2

          $1000 commision for the broker on a 7k loan is a bit steep !

      • HighAndDry on 02/10/2019 - 13:56
        +1

        initially I was told I can get a loan on a Learner permit, after sending it in I was told no you cant.

        Could well be a case of: it's possible, but just not for you after reviewing your personal circumstances.

  • HighAndDry on 02/10/2019 - 12:54

    Unless you've got a better loan offer in front of you, it's either take what's offered or buy a car that's within your budget instead.

  • Witchdoctr on 02/10/2019 - 13:29
    +1

    Honestly just apply for one yourself.

    A broker will either offer you a low rate with high fee's or a higher rate with "no fee."

    Remember that the fee isn't just $1700 but will also be charged interest over the life of the loan. So unless the rate they can get for you is more then a couple of percent cheaper then you will end up worse off.

    Suncorp were one of the cheaper carloan providers about 6 months ago, but they took bloody forever to process the loan. RACV ended up coming through in a few days and worked out roughly $300 more over the life of the loan (on roughly $30k)

    I am not a finance person but honestly shop around. Look at the total repayment amount (or your monthly repayments) and you can basically ignore the "rate"

  • Seraphin7 on 02/10/2019 - 14:24
    +2

    Buy a car without finance and avoid fees and interest rates altogether?

      • Seraphin7 on 02/10/2019 - 15:55
        +1

        Not really a matter of that at all.

        The reality of it is that paying a fee of ~17% upfront and however much in interest is probably not the best way to "bag a bargain". In the spirit of this site, it may be more useful for you to consider whether a cheaper vehicle (that avoids the need for a loan and the attendance fees and interest) may be a better option for you … or perhaps some car sharing program?

        As others have mentioned, the costs you've been quoted appear to be "in the ballpark" for what you're proposing. If those costs don't represent good value, the proposal itself may need to be reconsidered if you've more or less been quoted a market price.

      • mskeggs on 03/10/2019 - 06:17
        +2

        There are many reliable cars for sale for much less than $9000, or the $12000 this $9k car will end up costing you.

  • meowsers on 02/10/2019 - 14:25

    Tesla (through Macquarie) offer a 3.9% rate with no fees.

    Does this mean it is being subsidised?

  • seraphim2017 on 02/10/2019 - 14:38
    +4

    buy what you can afford, don't go into debt for a depreciating asset. Then trade up to better/safer/nicer once you can afford to. Otherwise you're burning money/giving it away after you've earned it to someone else.

    • dcep on 02/10/2019 - 16:00

      doesn't apply to high yield investment vehicle

  • orangetrain on 02/10/2019 - 15:45
    +1

    OP, be a through Ozbargariner. It sounds like you're poor but are you time poor?

    Add up the car and finance cost as well rego, insurance, etc. Then divide by how many years you plan to keep car.

    For the per year amount, further divide it by trips.

    Could the taxi+rental+public transport option cheaper?

  • JediJan on 03/10/2019 - 09:39

    I used to work for a finance company. I have never had any loans, only credit cards (one is a prepaid we use for shopping budget and points scheme), for convenience factor only. I never pay interest. Considering how much interest you will be paying for that vehicle assess whether you really need a car right now or can wait a couple of years to save like crazy. I have always saved for my vehicles and only bought what I could afford. Two years ago I finally bought my first new car, but only because it was an end of model sellout and reduced by thousands. I was seeking a car for my son at the time and decided it was far safer he had my old one. Fortunately he agreed and still has it, madly saving for his next I am happy to say.

    I would suggest ring around finance companies for interest rates and fees for comparison purposes (without giving them your details or making any applications.
    Hang up if they insist.).

    Do you have a family member that would/could offer you an interest free loan? Too many people go under with credit card debt and other loans; I can only wonder at this.

    As for credit rating apparently I don't have one; I figure that is a luxury I don't really need.

    • spackbace on 03/10/2019 - 11:28

      I would suggest ring around finance companies for interest rates and fees for comparison purposes

      Can't do that ever since the banking royal commission. Everyone is profiled separately now, based on credit score and a few other key bits. There's no simple "oh you're working full-time and have a mortgage? Your rate is X". Doesn't work like that.

  • Kinko82 on 04/10/2019 - 21:04
    +1

    If you broker can't explain why he is charging the amount of origination fee and you don't feel comfortable getting clarification from your broker then maybe you should find a different broker. Sweefu has explained the charges really well and they are how it works in the industry. The $990 origination fee is definitely up to your broker as this fee is paid to him/her for the efforts of arranging/processing your car loan. So they could charge you $550 if they wanted to or whatever amount up to a maximum of $990 (this is the limit as per the regulation).

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