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A variable-rate car loan has been issued by the non-bank lender as it ramps up its vehicle finance presence.
Firstmac has launched the variable-rate product with an interest rate of 3.19 per cent for “green” electric or hybrid vehicles (3.73 per cent comparison), while the rate for other new vehicles is 3.29 per cent (3.83 per cent comparison), provided the borrower is a home owner.
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Firstmac managing director Kim Cannon said the variable-rate car loan was “groundbreaking”, given that the majority of lenders offer fixed-rate car loans.
He suggested that the product offers much greater flexibility than a fixed-rate loan, with the ability to make advance repayments and to redraw up to $5,000 per day, using the accumulated advance repayment balance in the account.
Mr Cannon commented: “While some major lenders are exiting the car loan market, we view the current environment as an opportunity to grow using the same philosophy of innovation that has seen us prosper in the home loan space.
“Our variable-rate car loan is a prime example of this. Most Australian home loans are variable-rate products so we know that borrowers prefer variable, yet until now most lenders have only offered them fixed-rate car loans. We are going to change that.”
Mr Cannon added that he expected the variable-rate product to be “very popular” because the selling proposition for a variable car loan rate was even stronger than for home loans.
“Car loans are smaller and have much shorter duration than home loans so the impact of any potential rate rise is relatively modest, while the borrower still gets the benefit of a lower starting rate and much more flexibility,” Mr Cannon explained.
“On a typical five-year car loan, more than 70 per cent of the loan interest has already been paid-off within 2.5 years, so brokers can make an excellent case that a variable rate is a conservative option that offers the best of both worlds – flexibility and savings.”
The move comes as Firstmac ramps up its journey into vehicle finance after purchasing car loan brokerage CarLoans.com.au and car-buying service Georgie in 2020 and relaunching the platform car-buying service as OnlineAuto.com.au in September last year.
The lender has said that it is now preparing the groundwork to issue its first-ever asset-backed bond secured against car loans.
[Related: Firstmac to acquire brokerage]
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