DO AUSTRALIAN
BUSINESSES TRUST
CAR DEALERSHIP
FINANCING?

About the study

Small Business Loans Australia commissioned a survey of 202 directors and decisionmakers of small to medium-sized businesses to find out whether Australian SMEs trust motor dealerships to give them the best financing deal on the market.

Respondents were asked how confident they would feel about getting a good deal with a low interest rate and minimal fees when buying a new or used car at a dealership.

The survey also asked respondents if they would accept financing from the motor dealership or shop around for a better deal, and how they would seek alternatives. Respondents could select from one of the following answers:

• I would compare the dealership’s loan with a car loan offered by my bank.
• I would go to a finance broker so that I can compare car loan interest rates and fees across multiple lenders.
• I would shop around for a loan myself through online loan platforms and comparison websites.
• I would shop around myself by approaching the top banks only (online or in person)
• I would simply take the loan offered by the car dealership.

DO BUSINESS BORROWERS BELIEVE MOTOR DEALERSHIPS OFFER FINANCING WITH A COMPETITIVE INTEREST RATE?

Small Business Loans Australia’s research revealed that more than half (56%) of businesses lack confidence in motor dealerships providing the best car finance options.

Only 44 per cent of the respondents expressed a high level of confidence in securing the best loan deal with the most competitive rates and lowest fees when purchasing a new or used car through a motor dealership.

If you were to buy a new or used car at a dealership, how confident would you be that the financing offered by the dealer came with a competitive interest rate and low fees?

By State.

Across the States, Queensland businesses are the least confident in securing the best loan through a dealership (with 63% saying they are not confident). Only 37 per cent of businesses in Queensland would feel confident that motor dealerships offer a good loan option.

Similarly, a significant proportion of NSW businesses are not confident they would receive a good loan through dealerships (58%). This compares with 50 per cent of businesses in Victoria.

In contrast, South Australian and West Australian SMEs are equally likely to trust dealer financing compared with other states (with 54% confident in dealer loans).

By business size.

Small Business Loans Australia found micro businesses are least likely to trust dealer financing, with 66 per cent stating they don’t have confidence in securing the best loan through a dealership. This compares with:

• 47% of medium-sized businesses
• 46% of small businesses

HOW MANY BUSINESSES WOULD DO THEIR OWN RESEARCH FOR THE BEST CAR LOAN ON THE MARKET?

Small Business Loans Australia found that 97 per cent of businesses would compare a dealership car loan offer with another loan elsewhere, to ensure the dealership is giving them the best deal.

More specifically, 33 per cent of businesses would compare the dealership’s car loan with a car loan offered by their bank, 28 per cent would shop around for a loan through online loan platforms and comparison sites, and 25 per cent would go to a finance broker so that they can compare car loan interest rates and fees across multiple lenders. A further 11 per cent said they would shop around by approaching the top banks.

Only 3 per cent of all businesses would simply take the loan offered by the dealership.

Would you take the loan offered by the dealership, or would you do your own research – and what kind of research?

By State.

Across the States, businesses in Western Australia are most likely to compare a dealership loan with a loan by their bank (46%). This compares with:

• 39% of South Australian businesses
• 31% of businesses in NSW
• 30% of Queensland businesses
• 29% of Victorian businesses

The survey also found that South Australian businesses (39%) are more likely to go to a finance broker to compare interest rates and fees than businesses in any other State.

In NSW, 32 per cent would look for loans on online platforms and comparison sites, whereas only 5 per cent of West Australian businesses would do the same. On the other hand, in Western Australia, 23 per cent of businesses prefer to consider loans exclusively from the top banks, which is almost double the 13 per cent seen in NSW.

A similar consensus was shared across the states when it comes to simply taking the loan offered by the car dealership. Only 5 per cent of West Australian businesses would do so, followed by businesses in NSW (3%), Victoria (2%) and Queensland (2%). No businesses in South Australia would take the first loan offered to them by a dealership.

Would you take the loan offered by the dealership, or would you do your own research – and what kind of research? (By State.)

By business size

Across business sizes, micro businesses are most likely to compare dealer financing with a car loan offered by their bank (41%). This compares with:

• 36% of small businesses
• 29% of medium-sized businesses

Small Business Loans Australia found that medium-sized businesses are more likely to go to a finance broker (32%) or shop around on online platforms and comparison sites (29%) than businesses of other sizes.

A higher proportion (15%) of small businesses would shop around for a car loan by approaching the top banks, followed by medium-sized businesses (11%) and micro businesses (10%).

The data reveals that 8 per cent of small businesses would take the loan offered by the car dealership. Only 1 per cent of micro-businesses would do this, and no medium-sized business would take the dealership’s offer without shopping around for a better deal first.