By Mary Nebotakis, B. Eco, Dip. Financial Services, Managing Director, Natloans

As we move into 2025, low-interest rates and high-residual loans are being promoted more than ever. While these offers might seem like a dream come true, they can often lead to significant financial pitfalls, particularly the risk of negative equity. Let’s take a closer look at what this means and how you can protect yourself. 

What is Negative Equity? 

Negative equity occurs when the value of an asset, such as a car or property, drops below the outstanding balance of the loan used to finance it. This situation is particularly common with vehicles, which depreciate quickly after purchase. For example, if you owe $30,000 on your car loan but the car’s market value is only $25,000, you have $5,000 in negative equity. 

Why Are Low-Interest and High-Residual Loans Risky? 

These types of loans are structured to offer lower monthly payments, which can be appealing to many borrowers. However, the trade-off is that they slow down equity accumulation, leaving you vulnerable if the asset depreciates faster than anticipated. This is especially problematic for rapidly depreciating assets, like vehicles, where negative equity can develop quickly. 

The Real Costs of Negative Equity 

1. Limited Financial Flexibility: If you decide to sell or trade in your asset before the loan is paid off, you may need to pay the difference out of pocket. 

2. Challenges with Refinancing: Loans with high loan-to-value (LTV) ratios can make refinancing difficult or result in less favourable terms. 

3. Insurance Gaps: If your asset is damaged or totalled, insurance may not cover the remaining loan balance, leaving you with debt but no asset. 

How to Avoid Falling Into the Negative Equity Trap

1. Choose Shorter Loan Terms 

While longer terms lower your monthly payments, they increase the risk of negative equity by slowing down equity build-up. A shorter term reduces this risk and helps you build equity faster. 

2. Make a Larger Down Payment 

Putting more money down upfront reduces the principal amount of the loan, which helps build equity from the start and mitigates depreciation risks. 

3. Focus on Asset Quality 

Investing in assets with strong resale values can minimise depreciation-related risks. Do your research and opt for options that maintain their worth over time. 

4. Be Cautious of Residual Balloon Payments

High residual amounts can leave you owing a large sum at the end of the loan term, which may be challenging to pay off or refinance. 

Why Transparency Matters 

Understanding the long-term implications of your financial decisions is essential to making smart choices. At Natloans, we believe in transparency and equipping our clients with the knowledge they need to make informed decisions. By identifying potential pitfalls like negative equity, we aim to help you achieve financial stability and peace of mind. 

Plan for Success in 2025 

Low-interest and high-residual loans may seem like a quick fix, but understanding their potential drawbacks is crucial. By taking steps to avoid negative equity, you can protect your financial future and ensure that you’re making the most of your investments. 

For more tips and expert advice on smarter finance solutions, visit our blog regularly or get in touch with one of our specialists. 

By Mary Nebotakis, B. Eco, Dip. Financial Services, Managing Director, Natloans

If you’ve ever thought about leasing a car, you might have heard the term Guaranteed Future Value (GFV). It can be a popular option among car buyers, promising peace of mind by guaranteeing the car’s value at the end of the lease. But what exactly is GFV, how does it work, and what should you consider before committing to it? Let’s explore this in more detail, including the pros and cons, as well as an alternative to help you make a more informed decision.

What is Guaranteed Future Value (GFV)?

Guaranteed Future Value (GFV) is a leasing arrangement that sets a predetermined value for your car at the end of the lease period. This value is determined by the manufacturer based on factors such as the car’s make, model, and your agreed-upon terms (e.g., annual mileage and lease duration). Essentially, GFV gives you clarity and confidence about the car’s residual value, ensuring you won’t be left in the dark when your lease ends.

GFV is available only on new or demonstrator vehicles leased through a manufacturer’s finance plan, not for used cars or cash purchases.

How Does GFV Work?

When you choose to lease a car with GFV, there are some key items that can impact your lease agreement:

• Lease Term
  The length of your lease term will affect your monthly repayments. A shorter term means higher payments, but you’ll be finished with your lease sooner. A longer term means lower payments, but you’ll be committed for a longer period.
• Whether You Contribute a Deposit
  While not necessary, putting down a larger deposit can reduce your monthly repayments. A bigger deposit upfront typically means less to pay each month.
• Kilometres travelled Each Year
  The number of kilometres you plan to drive each year impacts the car’s residual value. The more you drive, the lower the car’s value will be at the end of the lease, so it’s important to be realistic about your driving habits.

Once you’ve decided on these details, the manufacturer will calculate the Guaranteed Future Value, which is the agreed-upon value of the car at the end of the lease.

What Happens at the End of the GFV Lease?

At the end of your lease, provided the car meets the agreed conditions (mileage limits and fair wear and tear), you typically have the options of returning the car, buying the car or trading in the car for a new vehicle.

Pros and Cons of GFV

Like any financial product, GFV has its benefits and drawbacks. Here’s a breakdown of the key pros and cons:

Pros of GFV

• Predictability: One of the biggest advantages of GFV is that you know exactly what the car will be worth at the end of your lease. This eliminates uncertainty about residual values, especially in fluctuating markets.
• Flexibility at Lease End: At the end of the lease, you have the option to trade in, buy, or return the car without worrying about market conditions.
• Lower Monthly Payments: Because the car’s future value is guaranteed, your monthly lease payments may be lower than traditional finance deals where you’re paying off the entire value of the car.

Cons of GFV

• Mileage Restrictions: You’ll need to stay within the agreed-upon mileage limit. Exceeding the limit can result in additional fees or a lower value for your car.
• No Lump-Sum Profit: Unlike some finance deals that allow you to buy the car for a lump-sum payment that may be lower than its market value, GFV locks in the future value. This means you won’t have the potential to buy the car for less than it’s worth.
• Conditions Apply: You must adhere to manufacturer conditions, such as regular servicing and proper maintenance, to ensure the car remains in acceptable condition. Failure to meet these conditions could result in extra charges.

What is the Alternative to GFV?

If Guaranteed Future Value doesn’t sound like the right option for you, there are alternatives to consider. One of the most common alternatives is a traditional car loan.

With a traditional loan, you finance the full value of the car and make regular monthly repayments until the loan is paid off. At the end of the loan, the car is yours, and you have the option to keep it, trade it in, or sell it. Unlike GFV, with a traditional loan, you are not restricted by mileage or other terms set by the manufacturer.

However, the downside is that your monthly payments may be higher, as you are financing the entire cost of the vehicle rather than just the depreciation. Plus, you may not have a guaranteed minimum value at the end of the loan term, so you’re more exposed to the car’s market value at that time.

Which Option is Right for You?

Choosing between GFV and a traditional car loan ultimately depends on your financial situation and preferences. GFV can be a great option if you value certainty about the car’s value at the end of the lease and want lower monthly payments. However, if you want more flexibility and the potential to profit from the car’s resale value, a traditional loan might be the better option.

Understanding both options and their pros and cons will help you make an informed decision about the best way to finance your next vehicle.

For more information on how to choose between GFV and a traditional loan, give the expert team at Natloans a call or click here to have our team reach out to you.

Plated Run-Outs — What Are They?

Plated run-outs are a period of sales in which cars tend to sell for particularly low prices, at the beginning of the year. Key points to keep in mind about them are as follows:

• Why the low prices?

Usually, the prices on cars tend to lower around this time of year because as the year ticks over, the value of models made prior thereto tend to drop, as they date. Thus, dealerships will try to sell out all the older and more niche models of cars before they age further, and thereby drop lower in value. This leads to the low prices at dealerships around January.

• Make sure to get in early!

The fact of the cars needing to be sold at a higher price in the first place is generally a good indicator that some of the cars within the sale are not the optimal purchases. For example, some cars may be coloured in an aesthetically unpleasing manner, and are, for that reason, destined to meet their fates at the January sales.

That being said, the longer you wait from the beginning of the sales, the more likely it is that by the time you get there, you’ll be stuck with everybody’s last choices. So make sure to be quick, in order to get the best deals!

What to Watch Out For

• Resale value is low

If a car requires a rather enormous discount to sell in the first instance, then it’s more than likely that upon resale, it won’t grant a fantastic return in investment. When making a purchase at such a sale, it is best to bear this information in mind, and planning accordingly.

• Watch out for rip-offs and charlatanism

Some cars may be resigned to these sales for reasons other than their aesthetic value; for example, their actually functionality, or lack thereof. It is unfortunately common for some dealerships to slip in a few dodgy cars along with the bundle, so it is very important that you keep a keen eye open when evaluating a car for purchase.

Secondly, you must keep an eye open, so as to not fall into any sales traps designed to dupe you out of more money than you should give. A classic example of this is the “zero percent interest rates” trick, about which we have already written an entire article, that can be found here. In brief summation, however, always assume that ‘zero percent interest’ is a rouse intended to bait one into paying an inflated price for a product, whilst thinking that they’ve stumbled upon a bargain.

The Best Advice We Can give?

The best advice that can be given is not to be found through a generalised article (though research is a good start), instead, you should make sure to be in contact with a Natloans consultant, if you are interested in taking a risk on plated run out sales.

Our team is more than ready to assist you in making the best purchase possible, equipping you with quotes, and even helping you get finance for a car, just to make it that little bit more affordable.

What’s The Deal?

“Zero Percent Finance”. Sounds amazing, right? Right; and that’s because it’s supposed to. The deal with ‘zero percent finance’, or ‘zero percent interest rates’ is basically that from any particular automotive company, or car dealership, one will be able to take home certain vehicles, using loans which have no interest rate attached. This means that the price at which you purchase will not be compounded upon over time.

What’s The Catch?

The catch here is that when you participate in these deals, not only are you not saving money for value, but more likely than not you’re spending way too much money, relative to the value of the product in question. In order to make a profit through this practice, dealers need to inflate the upfront cost of the car. Often, when this has been done, the amount of money which one pays for the car will be higher than if they had bought it with a loan. For example:

Consider a car with the value of $15,000, with an interest rate of 5.00%, paid back over the course of three years. All in all, even with interest, the total cost of the car is only $16,184, when all is said and done.

In contrast, when a dealer offers you the same car for $17,000, with so-called ‘zero percent interest rates’, it leaves you out of pocket significantly, whilst simultaneously seeming to be, at a glance, a seductive offer.

How To Avoid Getting Scammed

There are several steps which one can take to avoid falling into the trap of ‘zero percent finance’.

Firstly, always make sure to take time and evaluate whether the seemingly perfect deal that you’re being offered is actually as profitable as it appears. A great resource for evaluating the repayments on a loan is the Natloans Repayment Calculator, which will do the maths for you on a car, or any other item which you may be interesting in purchasing.

Secondly, don’t succumb to the pressure which fast-talking wheeler-dealers can apply. It can be very easy to get swept up in the charms, and promises of an experienced dealer, and certainly, you wouldn’t be the first person to have a car sold to you on the spot, if they really are worth their salt. With this in mind, it is probably wise to remember that no matter how good the deal may seem, there is always a catch, and moreover, you were satisfied of where you were and what you had, long before the salesman alert you otherwise.

Thirdly, if you’re confused about interest rates, car loans, repayments, or anything else; make sure to speak to a finance broker as soon as possible. Our team at Natloans would be more than happy to speak to you and address each and every of your qualms, and ensure that you walk away from any situation with the best deal possible. For all your car finance, and insurance needs, call Natloans today at 1300 955 791, we look forward to hearing from you!

What’s Is A Loan Pre-Approval?

Basically, this means that a lender will have confirmed your eligibility for a loan, as well the general boundaries and size of the loan in question WITHOUT having given you the final approval yet. These loans usually pertain to the purchase of homes.

This can be profoundly helpful in determining the scope of a potential purchase, that is, how much you can afford to spend, as well as boosting confidence in auctions by virtue of it giving you a definite cap on your bidding.

Pros?

Many of the benefits of a loan pre-approval speak for themselves. To begin with, however, is the fact of the pre-approval protecting you from over-expenditure, and commitment to sums which can not be met. In the same vein, having a pre-approval can help you to narrow own your options in terms of what’s affordable.

The fact of a having a pre-approval may also make one a more attractive buyer, because from the seller’s perspective, one would appear to be a more serious, well-equipped, and competitive buyer if armed with a loan pre-approval.

Cons?

There is no real drawback to having a loan pre-approval, although, there are certain facts and factors that one should keep in mind when obtaining one.

• Credit rating – When you apply for a pre-approval, it will appear on your credit score as being a ‘loan enquiry’. Whilst this is fine once or twice, If one takes out many loan enquiries in a short period of time, it will severely harm one’s credit rating and damage one’s ability to borrow money in the future. It is therefore advised to only seek pre-approval ONCE and from ONE SOURCE, preferably a finance brokerage, such as Natloans.

• Subject to change – Unfortunately, in some cases, having a loan pre-approval does not necessarily mean that one will have a guaranteed loan. This is because multiple factors can shift the lender’s willingness to give out the loan, such as; changes on regulations, change in the property’s condition or value, and changes to your own, personal conditions of finance.

These factors, however, are often part and parcel of any sort of financial investment.

How Can I Get a Loan Pre-Approval?

In order to get a pre-approval loan, one must basically fulfil all the requirements that come along with a regular loan approval. These vary case-by-case as it respects the specifics, but in general, this calls for a clean credit history, healthy and stable income, and willingness to follow through.

The best way to go about getting a pre-approval loan is through a finance broker rather than directly through a lender. This is because a broker will be able to sift through all the options and get all the leg-work done for you, saving you the effort and applying expertise to ensure that you can get the best deal possible.

Even better, when a broker inquires as to your ability to get a pre-approval, it WILL NOT SHOW UP ON YOUR CREDIT HISTORY, which means that if you choose this route, a broker can search and apply for you as much as you need, WITHOUT DOING ANY DAMAGE TO YOUR CREDIT RATING. This is because it is classified as an agent inquiry rather than a client inquiry.

Natloans has been getting loan pre-approvals done for our customers for nearly two decades, and our veteran team of finance brokers are equipped with the knowledge, experience and capability needed to ensure that you will be able to get hold of the approval and security you need, to take ownership of the home and property that you deserve.

So what are you waiting for? Need security and pre-approval? Have your eyes on a property and need to budget? Call Nations today!

When it comes to cars, the question is age-old; to buying privately, or through a dealer? There are a number of decidedly complex pros and cons to both options, the building multitude of which can be confusing, frustrating and paralysing to potential car-buyers. Lucky for the lot of you — Natloans has set out to write this article to help you wade through the information, and make the best decision possible respecting the purchase of your new car.

The Advantages of The Dealer Purchase

There are two key advantages of working with a dealer, namely:

• Safety

First and foremost, purchasing from a dealer helps you in terms of the security associated with the car which you purchase. A licensed dealer is subject to many regulations and standards, and as such, any product which they have on sale is subject to rigorous scrutiny and inspection. This means that not only is a dealership vehicle certain to be safe, but also certain to not be suffering any hidden defects and quality issues.

• Ease of process

Another big benefit of working with a dealer is the fact that generally, the dealer will take on the burden of paperwork for you, including the transfer of title, registration and other tidbits, thusly making the process of sale a far less tedious and stressful one. In addition, the dealer will often offer you a warranty on the car which you’ve purchased.

These factors, amongst others such as peace of mind, potential trade-in value, and more are just a few reasons why buying from a dealer can often be the way to go.

The Advantages of Private Sales

When it comes to buying privately, there’s one great advantage of which most everybody knows:

• Price!

The fact of the matter is that buying privately is always cheaper than buying from a dealer by virtue of the cars used status, and the fact of it’s not having gone through the aforementioned rigorous inspection which dealership’s cars have.

Moreover, the fact of the car’s asking price being somewhat inflated means that the selling price can be quite easily bargained down, making the car even cheaper still!

As tantalising as the price may be, there are several things to keep in mind when purchasing a car privately.

Tips for Private Sales

As previously mentioned, there are several factors which must be kept in mind when purchasing a car privately.

• Asking Price vs. Selling Price

An important factor which must be recognised is the difference between asking price and selling price. The asking price is the price at which the car is being advertised, usually based on a third party appraisal. Although this is the case, the car will almost never be sold for as high a price as that at which it’s being put up for, and the price at which it ends up selling for is referred to as the selling price.

The selling price is the price at which the vehicle in question is bought, and is always many notches lower than that at which it was advertised. This lowering of the price is achieved by the buyer after an inspection, followed by a bout of bargaining.

• Quality and Safety

As previously mentioned, a dealership is subject to several scrutinies which ensure that the cars which they sell are in top shape, in terms of both safety and quality. Unfortunately, a private sale has no such ‘safety net’. Oftentimes, a private seller may obfuscate issues with the vehicle being sold deliberately for the sake of inflating the price, or, not mention them simply because they are unaware of or accustomed to the issues in question, by virtue of having made do with them previously.

Therefore, it is imperative that the quality and safety of the vehicle in question is seen to by the buyer, and to this end, the help of a mechanic should be enlisted for the sake of a quality and safety inspection, so as to avoid over-paying for a sub-optimal car, or, indeed, paying at all for a potential death-trap.

• Warranty

Simply put, a dealership will almost always offer a warranty along with your purchase, whereas a privately bought vehicle will not come with such a benefit. Therefore, one will either have to make due with a car without warranty or, potentially undercut the money saved on private purchase by seeking out and purchasing insurance.

How Can Natloans Help?

The whole process, as has been laid out, may seem both daunting and confusing, but luckily there are several ways in which the team here at Natloans is able to help you make the best decision, and get your hands on the new car of your dreams.

Firstly, if your short on money and are absolutely set on purchasing through a dealer, no need to stress! Natloans has you covered with our enormous range of car loan solutions (and dedicated team!) geared to get you the funds you need to get the car you want!

Secondly, if you’re interested in purchasing privately, but are worried about the lack of warranty associated therewith, Natloans has you covered again! We can assess your situation and link you in with our continent-wide network of insurance providers to ensure that your new car is safe and sound for the fairest price possible.

When purchasing privately, Natloans can do a background check on your vehicle, which will assess the finance, stolen status, written-off check, and a recall check for you!

And last but not least, if you’re just a bit confused and would like a professional to talk to, our team is here, ready and waiting just for you!