How Much Should A Broker Fee Be?
What does a car loan broker do?
A car loan broker provides you with a service. This service involves:
- Assessing your financial profile
- Matching you with suitable lenders and loans
- Preparing and submitting a loan application to your chosen lender on your behalf
- Arranging your loan settlement process once you find the asset you will use the loan to purchase
While you don't pay an upfront broker fee for this service if you don't reach the end of the application process, there is a broker fee included within your loan application.
Here's how loan broker fees work:
How much should a loan broker fee be?
A broker fee can range anywhere from a set fee to a percentage of the loan amount you’re requiring. This is charged as part of the service you are receiving. It allows for a broker to work and act on your behalf to negotiate and present options to a client. The broker is working on behalf of the client to get the best deal out there in the market.
Using a car loan broker vs direct lender car loan
When looking for a car loan, you want to make sure you are getting the best deal. A lot of people have their money in their own bank which they have used and trusted for many of years, so they feel it’s just easier for them to go to the bank for the loan.
We encourage getting the best deal out there, and that is why people choose brokers. As a broker, we have specialised lenders with products designed for different types of clients and clients buying different types of cars. Each lender has their own rates and fees, the benefit of using a broker is we present as many options as possible available to you, to work for you and get the best deal.
Getting a car loan through a lender directly usually costs the same, or may even be more expensive, than using a car loan broker. This is because lenders provide 'wholesale' prices and rates to car loan brokers which are often lower than the retail rates, and there's often a wider range of products available through a broker than you'll find at a retail bank branch.
Is there a difference between the application fee and the broker fee?
The application fee is a fee that the lender charges you to apply for the loan, a broker fee is a fee for the broker. All fees will usually be added into the loan and broken down to one easy weekly payment included in your loan payments.
Is there best practice for broker fees?
All brokers will charge a fee. On all consumer applications, you will receive a credit guide and credit proposal upon submission of your deal outlining all fees that may be applicable to your loan.
What does a customer need to look out for?
Customers need to make sure they are comparing apples with apples. Make sure when you are comparing lenders, banks, or even car dealers, that you have the full structure of the loan outlined. Everyone can quote an interest rate to you, but there are other factors to think about, such as loan term, residual values, deposits, broker fees and other fees, trade-ins, and more.
What questions can you ask to find out if your car loan broker is being transparent about their fees?
Ask the broker for the total amount financed. This will confirm the car price, all fees, insurances, warranties and any extras that the loan broker may have included or hidden in there.
What is ‘fair' when it comes to broker fees?
The fairest outcome for you, the customer, is getting the right car loan arranged quickly and easily. The advantages of using a car loan broker are that your application is assessed against a range of options before a hit is made on your credit file.
You can use the broker's advice to then decide which lender and loan option to apply for, and be confident that you'll have a good chance of approval as the broker has assessed you against the lender criteria.
When you apply directly with a lender, you'll be assessed against a single loan product, and the application is recorded on your credit file. Your choices are limited to the product you've selected, and there's no pre-assessment, just a yes or no answer about the loan you apply for.
How do I get the best car loan outcome?
Use a broker that is open and honest from the start, one that builds rapport and wants to find out as much information as possible to support your application.
As lending in Australia becomes stricter, finance applications are requiring more and more details for every application, so don’t be afraid if you think the broker is asking too many questions to ask if all they are going be relevant to your specific loan application.
Find out how a Positive broker can help you with your car loan.