Noma Finance founder Ashley Van Rosmalen says people are buying luxury cars they can’t afford. (Source: Ashley Van Rosmalen)
An Australian finance broker has called out people who “penny pinch” and refuse to buy $7 coffees, while acquiring luxury cars they can’t afford. The Melbourne woman reviews hundreds of people’s financial situations each day and says she is constantly seeing people take out expensive car loans.
Ashley Van Rosmalen says the irony is the same people who are stressing about buying a $7 coffee, eating lunch out, or their Netflix subscription costs, won’t question a car loan that’s “literally eating 40 per cent of their income” and could be around $400 per week.
“We live in Australia, so I think it would be crazy to say that you don’t need a car. I think almost everyone I know has a car. It is essential,” she told Yahoo Finance.
RELATED
But, Van Rosmalen said a luxury car payment could set you back $1,733 a month or more. In comparison, that $7 coffee would add up to around $210 a month if you bought it every day.
The Noma Finance founder, who previously worked at Mazda, said she’s also found people will haggle hard on the car price itself, but sign up for a car loan “within one hour”.
That means some Aussies could be paying a higher interest rate than they may need to be.
“[There’s] a big opportunity for people to save on those big ticket items so that they can have the little enjoyments of getting your nails done, going out for lunch, that are actually not that financially significant in the scheme of the annual salary,” she said.
“Whereas overpaying by $3,500 of loan interest or on your mortgage by not refinancing, you can’t even make up for that. One smart loan decision equals years of saved coffees, essentially.”
Do you have a story to share? Contact tamika.seeto@yahooinc.com
Australians borrowed around $4.9 billion in the September quarter for new car loans, Australian Bureau of Statistics data revealed.
The average new car loan is $46,583, according to Money.com.au data, while for used cars it’s lower at $28,116.
The average car loan interest is currently 9.15 per cent, based on Reserve Bank data, but the lowest rate available on the comparison site’s database is 5.09 per cent (comparison rate 5.78 per cent) for eligible borrowers.
Financial advisor Helen Baker previously told Yahoo Finance one of the biggest risks of borrowing money to purchase a car is that it is a depreciating asset, meaning it declines in value over time.
“You’re paying for [the car], then you’re paying interest payments on top of it. So, you’re paying way more than what it was originally worth, but it is also a depreciating asset,” Baker said.
“So, if and when you have to sell it, it is going to be worth way less than what you originally paid for it and what you paid back in interest repayments.”
Van Rosmalen encouraged Aussies to ask about the total costs involved with taking out a car loan, including the interest rate and comparison rate, and all the fees, including application, establishment, monthly account-keeping fees, and exit costs.
She urged Aussies to reflect on their own cars and whether they were actually an affordable one for them.
If you find your car loan is too expensive, Van Rosmalen said there were options.
“You can either downgrade, so sell the car, which ideally pays out the loan and then you can look for something more affordable. That would probably be the most common avenue,” she said.
“You could refinance it because if it’s at a non-competitive interest rate, that could be half the battle.”
Get the latest Yahoo Finance news – follow us on Facebook, LinkedIn and Instagram.