Caravan Finance,
Explained Properly

1How a caravan loan is actually structured

A caravan loan is an instalment loan. Somebody pays for the van up front, and you pay that amount back with interest in fixed instalments over an agreed term. What changes between products is what the loan is attached to.

Secured against the van

This is the common one. The lender registers an interest over the caravan, and if repayments stop, they can recover it. Less risk to the lender means secured caravan lending is priced more keenly than borrowing the same amount with nothing attached. The trade is that the van is not fully yours until the loan is paid out, and comprehensive insurance is normally a condition of the contract.

Unsecured personal loan

Nothing is attached to the van. The lender carries the whole risk, and that shows up in the cost. Unsecured borrowing is mostly relevant where a van is too old for a lender to take as security, or where the amount is small enough that the difference does not matter much.

Business structures

A chattel mortgage or similar business facility exists for vans genuinely used in a business. The tax treatment is the whole reason they exist, and that makes it a question for your accountant rather than a caravan website.

One thing worth knowing before you compare anything: dealer finance and broker finance and bank finance are not different species. They are all the same shape of loan, arranged by different people who are paid in different ways.

2The four levers that move your repayment

Every quote you will ever be shown is built from the same four inputs. Understanding which way each one pushes is most of what you need to judge whether a structure suits you.

• The amount you borrow. The purchase price less your deposit or trade-in, plus anything you fold in such as on-road costs or a dealer-fitted accessory. Everything added to the balance earns interest for the length of the loan, which is why a small extra at signing is rarely small by the end.
• Your deposit. A deposit reduces the balance directly, so it lowers every repayment, and it lowers what the lender has at stake against the value of the van, which generally makes the application easier.
• The term. Stretching a loan from five years to seven lowers each repayment and raises the total interest paid. It is a cash-flow choice, not a saving, and it is the lever people misread most often.
• The balloon or residual. Deferring a slice of the price to a lump sum at the end pulls the monthly figure down hard, and you carry a higher balance earning interest the whole way through, plus a sum to find or refinance on the last day. Useful as a cash-flow tool if you go in with your eyes open.

The honest way to feel how these interact is to move them one at a time and watch the repayment respond. That is what the calculator is for.

A calculator produces an estimate from the numbers you type in. Only a lender or a licensed broker can give you a rate, because that depends on the van, the structure and your file.

3What a comparison rate is telling you

Australian credit advertising has to show two percentages. The advertised rate is interest only. The comparison rate folds most of the standard fees in beside it, which is exactly why it exists: a keen headline rate propped up by heavy fees is an old trick, and the comparison rate is the law's answer to it.

The gap between the two numbers is the fee load. Two offers with the same advertised rate and different comparison rates are not the same offer.

There is one caveat worth carrying. The comparison rate is worked out on a standardised example loan, so on an amount or a term far from that example it is a fair way to compare rather than a precise forecast of your cost. The measure that cannot be gamed is the total cost of credit, every dollar you will hand over across the life of the loan. Any lender or broker can produce that figure on request, and asking for it in writing is normal.

What actually sets your caravan loan rate

4The process, start to finish

Seven steps, in the order they normally happen. The single most useful thing on this list is that finding the van is step five, not step one.

1. 1

   Work out what the repayment needs to be

   Start from what fits your week, not from the sticker price on the van. Move the amount, the deposit and the term around until the repayment looks like something you would still be comfortable with in three years.

2. 2

   Get your paperwork together before anyone lodges anything

   Identification, recent payslips or two years of tax returns if you are self-employed, bank statements, and a list of existing debts and card limits. Assembling this first is what stops an application stalling or being pulled and resubmitted.

3. 3

   Apply once, through one lender or broker

   Every application shows on your credit file whether it succeeds or not. A broker submits one application and does the shopping behind it, which is the point of using one.

4. 4

   Get the conditional approval and read the conditions

   Approval usually arrives with conditions attached, such as the van meeting an age limit, a valuation, or proof of insurance. Those conditions are the parts that most often move a settlement date.

5. 5

   Find the van, knowing your ceiling

   This is the point of doing finance first. You negotiate on the van alone, with the money question already settled, and a private seller can see you are ready to move.

6. 6

   The lender verifies the van and the seller

   Expect a PPSR search, a title check, and identity checks on a private seller. This is the step that quietly protects you from buying a van with money still owing on it.

7. 7

   Settlement, then the first repayment

   The lender pays the seller or dealer directly, clears anything owing on the van, and registers its interest. Repayments start on the schedule in your contract, and comprehensive insurance is normally a condition of keeping the loan.

Two of those steps deserve their own guide, and they have one.

Why finance comes before the caravan yard

5The words, in plain English

Finance paperwork runs on about ten terms. Once you know them, a quote stops being intimidating and starts being comparable.

Secured loan

A loan where the caravan is held as security. If repayments stop, the lender can recover the van. Lower risk to the lender than unsecured lending.

Unsecured loan

A personal loan with nothing attached to it. The van stays fully yours from day one, and the lender carries more risk, which is reflected in the cost.

Comparison rate

A single percentage that folds most standard fees in with the interest rate so loans can be lined up fairly. Legally required in Australian credit advertising.

Total cost of credit

Every dollar you hand over across the life of the loan, in dollars rather than percentages. The bluntest way to compare two offers.

Balloon or residual

A lump sum deferred to the end of the term, commonly set at 20 to 30 percent of the purchase price. Repayments drop, and you pay interest on the higher balance the whole way through.

Pre-approval

A conditional indication of how much a lender is prepared to lend, usually valid for around 30 to 90 days. It approves an amount, not a rate, and conditions still have to be met.

Establishment fee

The upfront cost of setting the loan up. Often financed into the loan itself, which means you pay interest on the fee too.

Early payout figure

What it costs to close the loan out before the end of the term. Worth asking about early, because plenty of people sell or upgrade the van before the loan runs its course.

PPSR

The Personal Property Securities Register. A national record of money owing against a van. A search costs a couple of dollars and is the standard check on any private sale.

Chattel mortgage

A business finance structure where the business owns the van from the start and the lender registers an interest over it. Relevant only where the van is genuinely used in a business.

6Know the price of the van before you price the loan

A loan is arithmetic on a purchase price, so the purchase price is where the real money is decided. We publish the manufacturer's starting price for every range we have checked, which makes it easy to see what a budget genuinely reaches before finance enters the picture.

Caravans under $60,000/Under $90,000/What caravans actually cost

Weight matters here too, because a van you cannot legally tow is a van you will be selling. Check the numbers against your car before you commit to either the van or the loan.

Caravan weights explained: ATM, tare, payload and ball weight

7Common questions about caravan finance

Everything on this page is general information about how caravan finance works in Australia. It is not financial or credit advice, and it does not take your circumstances into account. A licensed broker or lender is the only one who can tell you what is available to you.