Car sales in Australia are booming, with the number of people looking to refinance their car at a record high of 2.4 million.
But it’s not just Australians wanting to reframe their car as a finance vehicle.
Car dealers in Australia have been using this marketing tactic for years, and the average car loan interest rate for a three-month loan has increased by over 40 per cent since 2013.
According to Car Loan Calculator, the average monthly loan for a two-door car in Sydney is around $2,000, and that’s before any fees or car payments are factored in.
The average Australian’s first car loan in 2016 cost just $1,600, and has increased to $2.4k for the same car over the past five years.
The biggest factor behind the soaring interest rates in Australia is the government’s car loan scheme, which has been in place since 2013, and allows for loans ranging from $50,000 to $1.4m.
While the interest rates may seem steep, the government is not the only one trying to sell people on car financing, with car companies including Ford, Hyundai, Volkswagen, Toyota, BMW, Nissan and Toyota Motor have all been involved.
In 2017, a report from Credit Suisse said Australia was the most car-dependent country in the world, with over half of households and more than two thirds of workers using a car.
It’s estimated that a third of Australians use a car for work every day, and with a typical Australian spending just $10 a day, that could mean a significant monthly cost.
A typical Australian’s monthly car bill is around three times larger than that of other countries, with a large amount of credit card debt weighing on families budgets.
Car loan interest rates have increased by nearly 40 percents over the last five years, which makes it more expensive for people to refocus their finances.
While some of the biggest banks are offering low interest rates on car loans, the most popular lenders have been able to raise rates for some time.
But there are some drawbacks to this trend, including higher fees and extra costs.
As well as the upfront cost, there’s the additional cost of keeping up with a car loan and servicing it.
For example, a car that has a fixed term of 20 years costs $8,500 to $10,000 more than a car with a fixed loan term of six months or more.
If a car is serviced every year, that costs an average of $3,000.
And while the interest rate increases can be significant, they don’t necessarily reflect the costs associated with the car.
In a statement, a spokesperson for Credit Suise said:”The Australian car loan industry is experiencing unprecedented growth, with demand outstripping supply.
This has resulted in a rise in interest rates over the years and is likely to continue in the future.”
The spokesperson also highlighted that rates on the Australian dollar are also a factor in determining the price a car will fetch.