A must-read for anyone who was or is thinking of buying or financing a car in the next year or so, written by the GM’s of our vehicle buying and finance departments who have a combined more than 35 years’ experience in the vehicle industry.
Share it with friends and family as you will be helping them if you do.
Much has already been written about the possible effects of COVID-19 on the economy and the future of just about everything and it can get a little bit exhausting listening to everyone’s predictions and opinions.
The fact of the matter is that most of it is opinion and because we have not really been through anything like this in our lifetimes, most predictions are pure speculation.
To add to that, we have the end of the financial year approaching and a vehicle industry that is in a virtual meltdown (like many others).
In an attempt to stimulate the economy the Government has come out with a raft full of measures, the two most significant to the average person being:
It must also be remembered that even though a huge portion of the population has been affected financially by COVID-19, more have not. What has caused a problem is the uncertainty or fear factor.
I have come across people every day who are not struggling and who are working (even though it can be from home) yet are reluctant to spend with the fear of uncertainty ahead.
There is no way to combat that other than to constantly assure people we will get through and yes some things may change but we will all be okay. The mighty majority will all continue to have jobs, income and investments that will take care of our future.
So is this a time for Opportunity?
The perfect storm that is ‘COVID-19’ and ‘End of the Financial Year’ brings with it a great deal of incentive and at the same time a greater need to be informed more than ever before.
Lower Car Prices
Normally, May and June bring with them discounts from vehicle manufacturers designed for business. The reason is that if you have to pay the tax office from your annual profit then why not reduce that by spending some money on the business. A vehicle or two is a great way to do that. In a normal tax year you would be writing off a small percentage by doing this but this year you get to write off up to $150,000 in profit, if you have that much profit.
Since you have to pay the ATO even if it is later, regardless of the effects of COVID-19 (unless you are closing up for good) then it is just good money management to take advantage of the write-off. You can finance (with the right finance products) and get the full write-off paying a small amount upfront.
Private and Business
In the last few years, end of financial year sales have also benefited private buyers just by the hype of the season but this year is set for huge benefits. In April 2020, Australia has recorded a 48.5% drop in new car sales from April 2019. This is the largest drop in sales in recorded history and the industry is in turmoil and looking to May-June for recovery or respite at least.
Manufacturers are generally slower to react to crisis with pricing than the front-line dealers but you can expect dealers to be dropping prices all round in these two months to attract any business they can.
Will it last or get even better for buyers?
Car dealers have very short memories so at an educated guess I would say no! If they have one good month in June, they will consider the worse behind them and then back to normal… if they have a good month.
One very concerning aspect of change (as many industries will change as a result of the crisis) is the number of car manufacturers that are taking this opportunity to shift to online sales under the guise of “No Contact Shopping”. Many have been waiting for an event just like this to make the shift and they did not create all the processes and development required to do this since early March, they have been preparing for a while.
They will sell the benefits to you using the confusion of the moment but there is no question that prices and bargains will suffer. If manufacturers take over the sales process, dealers will no longer have a say in the price and there will be no negotiation. For many years now, as the car buyer for several salary packagers and finance entities, I have compared the manufacturer online price (even with the so-called discount) with the price I could negotiate with the dealer and always without even one exception could I beat the price and beat it significantly. Manufacturers have long wanted to get rid of this negotiation and some of the brands are now openly telling their dealers not to negotiate and don’t deal with brokers (who negotiate professionally on your behalf).
So again, if you are planning to buy in the next 12 months this is the time to buy, there is no doubt.
Interest rates are at an all-time low but there are issues. The hurdles are much higher now with the number of defaults and finance suspensions reaching epic proportions.
The credit report has become very important (even more than before) and proof of current income absolutely necessary whether business or private. Finance has become so difficult during this crisis that the vehicle industry is calling for the finance industry to ease up, they are losing what small sales they have to clients not being able to get approved. So be prepared to prove it and watch (or get) that credit report looked at by a professional (most cases it is free).
Job Keeper Income
Great initiative to keep people employed and the economy going but the finance industry has reacted to it poorly, even though in most case it is only short term and not necessarily caused by you the individual.
There is a pile of information out there for the business wanting to get Job Keeper Income for their staff but very little round what it means for the staff.
We have compiled a few questions below you may need to be asking if you are on Job Keeper Income.
If you click on the link you can book a call with one of our finance experts and they can discuss how it may affect you as well as any other questions you may have about financing.
5 FAQ’s – If I am current on Job Keeper Income:
By: Junies Lim
General Manager at NEXT Asset Finance
By: Junies Lim
General Manger at NEXT Asset Finance