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Australia's craze for new cars comes with a big debt problem – we borrowed $ 8.1 billion for the purchase of vehicles in the 12 months until November 2018.
The Comparative Web site Finder has reviewed data from the Australian Bureau of Statistics and found that 19% of the more than 1.1 million new cars sold during this period had been purchased as part of financial transactions.
Finder estimates that during the current year, Australians will pay more than $ 500 million in interest on these auto loans. The average amount is over $ 36,000, with an interest rate of 6.3%.
Graham Cooke of Finder said that Australians pay a lot of interest on auto financing.
"It's amazing to think that over $ 1.4 million in interest is paid back every day on these new cars. That's about the same value as 39 new cars, "Cooke said.
Auto financing is helpful for those who do not have the total purchase price, but Cooke has a warning.
The Toyota HiLux is the best-selling vehicle in the country. Image: provided.
"Do not forget that each optional supplement you add will increase the overall price and the amount of interest you pay over time," he says.
For every $ 5,000 of options added to the price of a vehicle, the homeowner will pay an average of $ 1,000 more per year over the life of a five-year loan, says Finder.
But there is good news for new car buyers. Tighter regulations on new car financing can potentially save buyers thousands of dollars in loan repayments.
Previously, dealers could add large margins to the lender's rate in return for higher commissions, but they can not now raise the interest rate proposed by the finance company. Instead, they can only reduce it by 2%. Brokers will only get a full commission if they sign the full rate financing transaction, so it may be difficult for potential buyers to negotiate seriously on this rate.
The Toyota Corolla is hardly more expensive than 20 years ago.
Another good news for Australian new car buyers, ABS inflation data indicates that cars are actually cheaper than 18 years ago, with prices falling by around 16% in current dollars since 2000.
For example, a Toyota Corolla is on the list for a few thousand dollars more than it was in 2000, even with inflation and huge advances in technology and safety.
A scarcity in consumer goods, which have become more expensive over time, is a sign that Australian buyers are getting better value for money on new cars.
"Cars have become progressively cheaper and technological improvements mean that Australians are getting more for their money," Cooke said.
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