1% Car Finance

  • Compare loans from multiple lenders

  • Search without impacting your credit score

  • Lowest interest rates and fees

  • Find your best loan deal swiftly

Contents

    What is 1% car finance?

    Many car buyers want to save money on their purchase, and searching for deals on car finance rates is a good place to start. Getting a 1% rate on your car loan seems like it’s nothing but upside, but these sales often aren’t as simple as they look.

    1% finance car deals are a common type of dealership offer to draw in customers. Dealers offer significantly discounted car loan interest rates when they want to quickly sell off their less popular models that are taking away space from new arrivals. However, before you rush to sign up for 1% finance deals on new cars, it’s important to dig into the hidden costs and other potential drawbacks.

    You should also take a close look at what other customers are saying about your neighbourhood dealerships.

    Hidden costs involved with 1% car finance

    Knowing the main downsides of 1% car finance can help prepare you for any unexpected surprises.

    Inflated purchase price 
    Some dealers may hike up the initial purchase price to offset the reduced interest rates. This is why you must compare total purchase prices as well as the monthly payments, which can be done through a car loan repayment calculator.

    Large deposit or balloon payment 
    The dealer might ask for a large lump sum payment either at the start of the loan (as a deposit) or at the end (as a balloon payment). These can be several thousands of dollars and might cancel out any savings from your lower monthly payments.

    Brief loan term or promotional period 
    Make sure you pay attention to the timelines for the loan and the 1% interest rates. Some deals might require you to pay off the loan in a much shorter period than normal. The 1% rate might also be a short-term offer that later reverts to a higher rate.

    Restrictions on makes and models 
    If you have your heart set on a specific make and model, low-interest deals on car finance might not be the right move. This is because those low interest rates often only apply to the older, less desirable models which the dealer has struggled to sell.

    Low trade-in value 
    When it comes time to buy your next car, the dealer might not give you a good trade-in offer if your original purchase was with a 1% interest rate. This is why it helps to know the pros and cons of new vs used cars in advance, so that you can plan ahead.

    Extra fees and charges 
    1% finance car deals frequently have additional fees and charges attached so that the dealer can make a higher profit. There could be additional monthly administration fees or higher early repayment fees. These don’t seem like much, but they add up fast.

    Alternatives to 1% car finance

    It always helps to know what options are on the table. If you’re not fully sold on 1% car finance, you should remember that there are many other ways of getting deals on car finance.

    • Traditional car loans

      If rolling the dice on 1% finance car deals doesn’t appeal to you, there are plenty of advantages to be had by sticking with standard car loans. You can still enjoy fairly low rates by getting a secured vehicle loan and using the car as collateral.

    • Novated car lease

      Many employers offer a salary structure where a portion of your pre-tax paycheck goes towards a car payment. This makes novated leases a great way to save money. You can also get your employer to pay for maintenance and insurance costs.

    What should I know before signing on a 1% car loan?

    Before committing to paying any money, there are several questions you should get answered. Going through this checklist will help make sure that you are actually getting the best deal.

    • What will be the total repayment amount over the life of the entire loan?
    • Can I get the same car for a lower overall price elsewhere, factoring in the interest and fees?
    • If yes, will the dealer match the lower price available somewhere else?
    • Is the low finance rate only applicable for this specific price, or is the price negotiable?

    1% car finance FAQ

    Who is eligible for 1% finance car deals?
    Premium interest rates usually require premium credit. As a rule, lenders will only entertain 1% finance applications from buyers with a strong history of financial stability.
    What is a subvented interest rate car loan?
    This is a special discount for car loans that you can get by going directly through the manufacturer. The manufacturer subvents (undercuts) the going market rate in order to boost sales for their particular products.
    What is the loan term for 1% car finance?
    Generally, low interest loans come with shorter terms than an ordinary loan. You can expect a loan term between 6 months and 3 years.
    Is 1% car finance always the best option?
    Not necessarily. 1% financing comes with several drawbacks and restrictions, so in some cases it ends up costing more than a traditional car loan. This is why it can be so beneficial to do your research ahead of time and look at several options.

    Biggest things to remember for 1% car finance

    Everyone wants to find the best deals on car finance, and only paying a 1% interest rate is an enticing offer. Unfortunately, some of these promotions end up being too good to be true. Before buying a car with 1% finance, it’s important to get a side-by-side comparison with several loan offers to clearly see which offer would be the best fit.