- Credit: Volkswagen

Automotive Finance 101

Here's the thing, I can't give you advice about automotive finance. Want to know why? Because based on current regulations and without a license it's illegal to openly promote. What I can do is complain about it, because it has become the most arduous process on earth. It is actually worse than making a journey to have your license renewed at your motor vehicle regulator. The amount of judgement that it incurs as well is totally ridiculous.

Anyway, let me start from the start, because some context would help you understand why banks and finance companies have me so riled at the moment. I'm a graduate in commerce and information systems. I'm a graduate who has studied economics and finance very closely, mainly because the world literally revolves around those two things in the 21st century. I'm a marketer and I majored in marketing but I took a particular liking to finance in general.

I have very little years of experience on this earth, but from the years I do have there are a couple of things I've been able to deduce from studies and research into finance. The first is you only ever invest in an appreciating asset. Very simply that means that if something makes money? You buy it. If an asset is depreciating you should never have it in your possession, ever. There's a technicality that provides reasoning for this, and many people here I'm sure would argue the point with me as well. But that technicality is that it isn't really an asset. The pure definition of the word asset is an item or piece of property that has value. Value is also a variable, something that I define as future wealth. Realistically in the specific example of vehicles? Unless you're buying a collectors item, there is little chance for future wealth as a result.

This brings me to my next point. So that being the case, in your financial portfolio or your general assets, how do you treat a car financially? I've got a solution that's worked really well for me over the past years. You treat it as an expense, hence the relation to automotive finance. The best part is treating it as an expense, and presuming you're savvy enough to structure your finance so you're in positive equity for most of the term, is that you can normally upgrade your ride prior to contract end.

Now, here comes the problems. Automotive finance, mortgages and personal loans have always been lumped into one pile by banks called - credit. Because the assessment for all of these products are exactly the same, normally if you can't get finance for one, you can't get it for the other either.

Alright I'm going to stop boring you with finance talk and get to the point. I'm getting a new car, an experience which in most cases should be fantastically easy. Except because my income is assessed differently from how it was when I got my previous car and my mortgage (and as a result of the Hayne Royal Commission) I'm having to weave and wind my way through the automotive finance part. The most ridiculous thing is that my total income far outweighs any credit checks required from a finance company. The reason I'm needing to jump through hoops is that income now all requires proof. I'm not talking about here's a pay statement proof. I'm talking about Chinese Communist Party every dollar must be accounted for proof.

For anyone that earns any sort of cash income at all? This is a massive problem, this is a huge problem. For any company owners with a company under 2 years old it's an even bigger problem, because the proof they need just doesn't exist. See I thought these changes to automotive finance were meant to stop people from borrowing ridiculous amounts of money they didn't need. Much alike to the changes in banking that happened in America after the GFC in 2007. But the fact is they just don't. Instead they're locking genuine buyers and businesses out of the market. It's crazy.

It means that someone like me with half a mind for finance, who wants to get into a commercial and practical vehicle, in this case the Volkswagen Amarok, which because it's a commercial vehicle it will almost always be in positive equity - just can't.

I have a solution, for all countries actually. You need to have different credit checks depending on the product you're purchasing. If you're getting a house for example I totally agree that you need to be ridiculously careful about how you go about checking credit. I mean 9 times out of 10 someone buying a house is way overspending what they should be (especially in Australia). A car though is such a small insignificant amount per week (in most cases) that needs to be paid that the credit threshold should be lowered significantly and means testing as a result (a test to determine how much you can borrow) should also have it's threshold for each credit level lowered. The limits placed should be on second and third vehicles, and additional credit.

Have I confused you enough? Great, I thought I might've. So the outcome is - yes I'm still going to get a beautifully slightly modified V6 Amarok to carry myself, my partner and my dog to the snow and blow more money on drinks in a chalet after spending the day skiing. It's just going to take a hell of a lot longer than I thought it would, and cause me enough headaches to end in a psychiatric ward. Volkswagen Finance are also going to know every intricate detail of my life, including any XXX credit card transactions I've made in the past 5 years. They'll probably lord that over me and use it to blackmail me into buying another Volkswagen at some point. But oh well, at least I have a car right?