Why a Bank May Charge Higher Interest Rates Than 2nd Tier Car Financier

The car loan market is highly competitive and the lenders that specialize in this field need to be able to stay competitive, otherwise they would lose a lot of business: from http://www.carloans.com.au/.

A high proportion of car finance lenders business comes from their introducers, such as dealerships, or finance brokers. As the dealership’s in-house finance managers and finance brokers collate a lot of the documentation and information for the client’s applications and present it directly to the lender through the lender’s software, this takes a lot of work away from the car finance lenders.

The introducers usually are providing decent volumes of business to the car finance lenders every month, so the lender needs to stay competitive with the other lenders in this market, or the introducers will not use them, which could mean large volumes of business lost every month, which the car finance lenders cannot afford to lose as this could be a large proportion of their business.

Due to a bank not being limited to car loans alone, and the fact that a lot of banks do not offer their products to external introducers, they have to include the additional cost of the full application process and collation of information and documentation into their interest rates, as this would make their cost higher dealing directly with the borrower.

Also, the fact that the banks are dealing directly with the borrower, for the bank to lose a client who may see them every two to five years for a car loan, is not going to hurt their business at all, especially that the car loans are only one small part of their business, as opposed to a specialist car finance lender relying on that business to be able to operate.

This can also transpose over to banks that do actually use introducers, where it is very common for the introducer to be able to offer you better rates than what the bank is offering directly to you, although you may have substantial history with your own bank. The main reason for that is because the introducer can obtain the competitive rates due to the volumes of business provided and that the introducer will do a lot of work in regards to the presentation and collation of information and documentation.