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Interest Rates – What Exactly Determines a Good Deal?

With constant reminders in the media about the Reserve Bank Cash Rates, mortgage lender’s aggressive advertising, the falling Australian dollar and Bank Bill Swap Rates, Australians are becoming more price-conscious when it comes to interest rates on vehicle finance.

RBA Unedited

Different methods of finance will always have different rates of interest available, depending on the loan size, the term of the loan, or the risk associated with the asset.

Standard Variable Mortgage rates can be sourced for around 5.45% at present, whereas some personal loans are currently quoting at around 17%, and some credit cards are even quoted at around 20%!

Under a Hire Purchase, Personal Loan, Credit Card or other method of finance, you rely on achieving the lowest possible interest rate to provide any form of benefit. So when it comes to Novated Leases, what should be expected?

Jason Gibbs, Senior Consultant at ProNovate explained “the Novated Lease centres around how the deductions are structured in your salary (commonly known as a ‘salary sacrifice’ arrangement). Because of this, changes in interest rate which would generally make larger differences in monthly cost on other loan types, make a very insignificant effect the net cost of a Novated Lease package.” Take the following for example:

Product: Fully Maintained Novated Lease
Car Price: $30,000
Interest rate: 6.5%
Repayment = $188.81 per week including all running costs
Interest rate: 7.5%
Repayment = $191.49 per week including all running costs

Based from the above scenario, thanks to the tax savings on the Novated Lease an interest rate difference of 1.0% or 100 basis points would only make a difference of $2.68 per week.

ProNovate’s experienced Consultants are equipped to provide clients with in depth calculations to help you make an in-formed decision before purchasing a new car or refinancing the car your already have. To obtain a detailed estimate for your own personal circumstance, simply fill out the details below and one of our Consultants will help you out!

 

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