Comparison rates - What's the big deal?
Let’s talk about why comparison rates are so important. Say you look to purchase a car – two dealers are offering you the same car.
|All on roads covered||On roads extra|
|Prestige paint covered||Prestige paint extra|
|Free fuel card of $500||No fuel card|
At first glance, above the line, Dealer 2 looks like they have the better offer – until you look at the whole deal. A comparison rate is looking at the whole deal for a loan.
It includes all the fees and charges and calculates what the interest rate is when these things are taken into consideration. Looking at the annual percentage rate solely is like only looking above the line – you really aren’t getting the full picture.
Because it helps customers identify the true cost of the loan it allows people to compare rates over an even playing field. If a lender has a low rate for one year and then the rate goes up considerably after this, this will be reflected in the comparison rate. A comparison rate is a true representation of what you will be paying once all things are considered.
Written by Samantha Cashion – Business Development Manager