Australians are expected to spend an average of $804 each this Black Friday, according to the Australian Retailers Association (ARA) and Roy Morgan. That’s likely to be a lot higher for those in the market for a new car, with plenty of dealerships slashing the prices on soon-to-be old stock.
Savvy data shows that November, January and February are three of the biggest months for car and personal loan applications. July is the only other month that typically beats the trio, with an influx of new financial year sales.
November has proven a popular time of year to buy cars, being the second-most popular month for new car sales in 2023 and fourth-most popular in 2022 according to data from the Federal Chamber of Automotive Industries (FCAI).
While you might land some great bargains, especially ahead of the Christmas season, there’s a hidden trap many Aussies might find themselves caught in: buy now pay later (BNPL) services. That’s because if you need to finance your vehicle purchase and have active BNPL accounts, it could spell trouble for your loan application.
How popular is BNPL in Australia?
A survey by Finder in 2024 found that 41% of Australians had used a BNPL service, such as Afterpay or Zip Pay, in the previous six months, while a 2023 report by Financial Counselling Australia revealed that an increasing number of counsellors were seeing spikes in BNPL usage for things like shopping, petrol, utilities and even food.
As a result, there’s expected to be a significant number of Aussies making use of these services to cover their purchases. Afterpay themselves are cited in the ARA and Roy Morgan’s insights, stating that 45% of Aussies will use the Black Friday period to buy big-ticket items.
How BNPL usage affects your loan application
While it’s possible to still be approved with BNPL arrangements on your file, Savvy Car Loans Expert Phil Goedecke says that any such activity will “sound the alarm bells” for lenders.
“If you aren’t keeping up with your repayments, that default is pretty much an automatic rejection for any lender”, Mr Goedecke said. “Even if you’re on top of your repayments, the banks don’t love that either.”
“If you have high regular use of BNPL showing on your bank statements, lenders may classify this as a regular recurring expense just like your rent or mortgage repayment.
“That means your loan serviceability will be affected, either by having your borrowing capacity reduced or rendering you unable to be approved altogether.”
How to improve your car loan approval chances if you use BNPL
The best thing you can do in anticipation of applying for a car loan is to cut back on BNPL usage as much as possible, according to Mr Goedecke.
“Because regular BNPL repayments are counted as a recurring cost, using these services as sparingly as possible will mean that you’ll have more money left over after expenses are deducted to service your loan”, he said.
“Cutting them out entirely in the three months leading up to your application will mean your lender won’t see any evidence of BNPL usage, but this isn’t possible for everyone.
“Applying for your car loan with Savvy connects you with an experienced, understanding broker who can assess your profile and let you know what your options may be as a BNPL user before you apply.”
So, while we aren't telling you not to explore the great deals Black Friday has to offer, it's worth being cautious about how much you're going to spend and avoiding putting it all onto your BNPL account wherever possible.