A variable rate car loan was issued by the non-bank lender as it strengthens its presence in vehicle finance.
Firstmac launched the variable rate product with an interest rate of 3.19% for ‘green’ electric or hybrid vehicles (3.73% comparison), while the rate for other new vehicles is 3. 29% (3.83% comparison), provided the borrower is a homeowner.
Firstmac chief executive Kim Cannon said the variable-rate car loan was “revolutionary” given that the majority of lenders offer fixed-rate car loans.
He suggested the product offers much greater flexibility than a fixed rate loan, with the ability to prepay and withdraw up to $5,000 per day, using the accumulated prepayment balance in the account.
Mr. Cannon commented, “As some major lenders exit the auto lending market, we view the current environment as an opportunity for growth using the same philosophy of innovation that has allowed us to thrive in home lending. .
“Our variable rate auto loan is an excellent example. Most Australian home loans are variable rate products, so we know that borrowers prefer variable rates, but until now most lenders have only offered them fixed rate car loans. We will change that.
Mr Cannon added that he expected the variable rate product to be “very popular” because the selling proposition for a variable rate car loan was even stronger than for home loans.
“Car loans are smaller and have a much shorter term than home loans, so the impact of any potential rate hikes is relatively modest, while the borrower still benefits from a lower starting rate. and much more flexibility,” Cannon explained.
“On a typical five-year car loan, over 70% of the interest on the loan has already been paid off in 2.5 years, so brokers can argue that a variable rate is a conservative option that offers the best of two worlds – flexibility and savings.
The move comes as Firstmac accelerates its journey into vehicle finance after buying car loan brokerage CarLoans.com.au and car buying service Georgia in 2020 and relaunching the car buying service as from OnlineAuto.com.au in September last year.
The lender said it is currently laying the groundwork to issue its first-ever asset-backed bond backed by auto loans.
[Related: Firstmac to acquire brokerage]