Name: Aboriginal Car Loans
Creator: Savvy
Published: 2020-12-14T14:13:21+10:30

Like all other Australians, Aboriginal people can apply for loans to buy a car through banks, credit unions and other lenders. However, there is no such thing as a car loan specifically for Aboriginal people. When it comes to car loans, the options available to you are no different from anyone else. These include:

Secured loans: where the car is used as security for the loan. Secured car loans can be taken out for a range of models, from brand-new up to as old as 15 to 20 years old. The length of the car loan can run from one to seven years.
Unsecured loans: which are not backed by an asset and so come with higher interest rates. An unsecured loan may be suitable when purchasing an older used car that doesn’t meet your lender’s criteria, such as being too old or not in good enough condition.
Fixed interest rate loans: where interest rates and repayments remain the same across your term.
Variable interest rate loans: which can be subject to interest rate changes, resulting in you potentially paying more or less depending on which way the rates move.
Bad credit loans: even if your credit score or history isn’t the best, there are lenders in Australia who specialise in working with people in your position.

Where to go for free financial advice for Indigenous Australians

There are some organisations that have programs specifically for providing advice to First Nations people and help with improving financial literacy. These include:

ACCC’s Be Smart Buy Smart guide: as well as car buying guidance, this document provides information on consumer rights regarding shopping, credit, refunds and more.
Moneysmart.gov.au: includes videos on “Managing money for your mob” and podcasts on Indigenous financial issues.
Mob Strong Debt Help: this is a free legal service about money matters for Aboriginal and Torres Strait Islander people in Australia. Services cover negotiating with lenders and debt collectors and dispute resolutions.
First Nations Foundation’s Rich Blak Women initiative: this program is designed with the intention of helping First Nations women prosper financially, offering free financial literacy training and resources.

Can I get a car loan for my Aboriginal business?

Yes – there are also several commercial finance options available to businesses looking to purchase a car. These include:

Chattel mortgage: works in a similar way to a standard consumer car loan, but comes with commercial benefits such as claimable interest, GST on the purchase and depreciation.
Car lease: this is a commercial arrangement where you agree to rent the car for one to five years. Depending on the type of lease, you can buy the car, sell it, trade it in or simply hand it back at the end of your term.
Hire purchase: these arrangements are less common nowadays, but under a hire purchase agreement, ownership of the equipment or car rests with the lender until the end of the term, after which it’s transferred to the business.

You may also wish to use a business loan to purchase your car if it doesn’t meet lender criteria in the same way you would an unsecured car loan. Indigenous Business Australia (IBA) offers flexible business loans to organisations that are 50% or more Indigenous-owned, including a Business Loan Package of up to $5 million.

How do I qualify for a car loan?

To qualify, you'll need to prove your identity and show you are reliable and have the ability to repay the loan. To meet your lender’s criteria:

You must be at least 18 years of age
You must be an Australian citizen or permanent resident
You must be earning a stable income which is enough to comfortably support your repayments (this can start from as little as $20,000 to $26,000 per year)
You must be employed and earning a consistent income from your job
You must meet your lender’s requirements related to your credit score
Your car must meet your lender’s requirements related to type, age and condition

Regarding your credit score, a good score increases your options for loans and can help you get a lower interest rate. However, even with a poor score or no credit history, you may still be able to get a car loan approved.

Other things lenders ask about include:

Assets, such as the value of your home and contents
Liabilities, such as a mortgage, personal loans and credit cards
Current expenses, such as rent and utility bills

What should I look for when shopping for a car?

There are plenty of factors to consider here. For a start, you need to consider not just the cost to buy the car, but what it will cost you to run it. This includes fuel, insurance, registration, roadside assistance, servicing and repairs.

The ACCC’s Be Smart Buy Smart guide for Indigenous Australians recommends the following when it comes to buying a car:

Buying a used car from a licensed dealer means there’ll be more protections in place for you, such as warranties.
Cars that are too old or very cheap may leave you to foot the bill for repairs, as they likely won’t be covered by a warranty.
Get a mechanic you trust to conduct an inspection on any second-hand vehicle you’re considering.
Don’t sign anything until you’ve read all the documents and are certain about buying the car.
Know your rights – for example, even if you’ve signed a contract, you may have a cooling-off period where you can hand back the car if you change your mind.
If you need a loan, draw up a budget to work out how much you can afford in repayments.

How can I compare different car loan deals?

There’s a range of ways to compare car loan offers on the market. These include:

Interest rates: higher interest rates will lead to higher overall costs, so look for loans with the lowest available rates
Fees: on top of rates, you may also be charged establishment, ongoing or early repayment fees, which can add up over your loan
Comparison rates: these include interest and the main fees on your loan, giving a more accurate indication of its cost
Loan amounts: different lenders offer different minimum and maximum amounts, so make sure yours offers what you need
Loan terms: you can take between one and seven years to repay your loan, but not all lenders will offer this full range
Repayment flexibility: some lenders may allow you to make additional repayments for free, which can help you save, but others may charge steep fees for paying your loan off early
Eligibility criteria: make sure you meet the eligibility criteria set in place by your lender
Car eligibility criteria: you’ll also need to make sure your car is the right age and in good enough condition to qualify as for your loan

Where should I apply for my car loan?

There are a few options here, which include the following:

Banks: applying with your bank might be the most convenient and potentially quicker than other options, since they have all your banking details on hand, but rates may not be as competitive and eligibility criteria are often stricter.
Credit unions: the same may apply if you do your banking with a credit union, except their rates may be better due to their member-owned model.
Online lenders: there’s a wide number of online lenders offering car loans to people of all financial backgrounds. It’s important to research your lender first to make sure you aren’t at risk of being scammed.
Car loan brokers: applying with a car loan broker can save you time and effort. These people can compare loans, negotiate rates and prepare documents for you, although they may only work with a limited number of lenders. Savvy is a car loan broker and we can walk you through the process from start to finish.
Car dealerships: applying at your car dealership is another convenient option, with some dealers offering rates as low as 0% p.a. However, deals may not bas as good as they seem, with potentially high fees, inflated purchase prices and high interest after an introductory period.

How should I avoid expensive loans and get the best deal?

Some simple tips for helping ensure you get the best available deal for your needs are:

Take the time to compare your options thoroughly
Draw up a monthly budget before you apply to help you work out how much you can afford
Examine the terms and conditions of your loan contract carefully to ensure you’re aware of all fees
Consult with one of the financial services listed above if you’re unsure about any part of your loan

According to the banking royal commission in 2018, Aboriginal people in remote communities were targeted by car dealerships and saddled with loans at rates as high as 48% p.a. and unnecessary insurance policies with little to no value. These products were sold on top of cars in poor condition that would break down soon after purchase.

It’s very important to avoid these types of dealers and to know your rights when it comes to car purchases. That’s where some of these free financial literacy resources can come in handy. Once you’re ready to apply for a car loan, you can compare a range of offers with Savvy and have the heavy lifting handled for you.