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In the driver's seat

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reporter 5 minute read

Decades ago, asset finance may have conjured up images of seedy salesmen and overstocked car yards – but in 2016 brokers are missing out on serious business by neglecting this sophisticated but simple loan product

Have you ever had a moment of self-indulgent panic where you wonder “why does everything have to happen at once?”

Big life moments and life-altering decisions rarely seem to come along one at a time in an orderly fashion and spaced out throughout the year, allowing you to weigh them up free of stress and emotions.

Instead, stressful and milestone life events often come within a couple of months of each other. Changing jobs, moving house, starting a family, needing a new car, investing in property and relationship breakdowns rarely exist in isolation. Sometimes one leads to the other – such as moving house to accommodate your growing family – and sometimes it’s just a matter of timing.

This convergence of circumstances can make people feel overwhelmed and long for a time when their biggest and most significant decision was whether to purchase a Bubble O’ Bill or opt for a cheaper alternative such as a Frosty Fruit (but lose out on the Bubble gum and associated joys in the process).

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Yet when everything happens at once, it gives people the opportunity to take stock of their lives, reassess their goals and re-examine their finances. This puts brokers in a unique position and offers them huge business opportunities – particularly because they’re involved when people are purchasing property and experiencing at least one of the significant life events listed above.

When you pause to consider this, and realise the pivotal crossroads in which brokers intersect with their clients, it becomes apparent that some broker businesses could be doing more to cash in on this phenomenon and assist their clients through more of life’s stressful situations. According to Craig Edwards, head of sales at Pepper Asset Finance, when people buy a new home, a new car purchase often follows within six months.

This link, he says, is largely driven by people upgrading their properties and moving into new neighbourhoods. Once they settle into their new suburb, they want their vehicle to match that of their neighbours.

In addition, due to affordability and technological advances, people are holding onto cars for shorter periods of time and purchasing new vehicles more frequently, according to Mr Edwards, who cites statistics showing the number of new cars sold in Australia is on the rise.

Brokers are therefore in the perfect position to offer their clients asset finance – and all they have to do is ask about the borrower’s vehicle when they come in to talk about their home loan.

“A lot of people who have a home loan will also need a car loan,” says Mr Edwards. “So if brokers don’t offer to talk to borrowers about asset finance, they’re simply giving the opportunity for someone else to talk to that customer regarding their second-largest asset.

“So it’s pretty complementary and fairly simple – and that’s probably why mortgage brokers should look at it and say ‘well I’ve done your home loan, when’s your car coming up? How are you financing it? We can help you with that.’”

Broker benefits

Offering asset finance to your clients may not be high on your priority list – after all, the loan sizes are much smaller when compared to those being taken out against houses in some of Sydney’s hottest suburbs and the commissions will likely be less lucrative – but Mr Edwards says brokers need to look at the bigger picture.

In terms of commissions for asset finance loans, Mr Edwards says brokers are “rewarded for what is a very simple process [with a] quick turnaround”.

“So from application to settlement, it’s 24 hours – as long as the car is ready for finance. It’s very simple, low-touch in terms of the documents required to be gathered to get the loan approved, and low-touch as far as getting documents that need to be signed by the customer compared to a home loan.”

This simplicity, he says, means that for the work involved in the loan, brokers are comparatively very well-rewarded.

Given the short turnaround times, customers also have less time to pull out of the deal, and there is less time for circumstances to change.

“With a car, it’s a very quick decision, and the finance all happens within 24 to 48 hours,” says Mr Edwards.

In addition, with the number of car sales continuing to climb in Australia, Mr Edwards says the asset finance market is looking strong in 2016. If the property market cools off, and brokers have less new clients walking through their doors, they can instead bolster their business by offering more services to each existing client.

“It’s about having product diversity and having more opportunities to deepen your relationship with your customer,” Mr Edwards explains.

“Everybody knows it’s much easier dealing with existing customers than it is to find new ones all the time. So with the car, the asset finance gives the mortgage broker that product diversity and the ability to give some instant advice and help their customer.”

It’s about converting every lead into the most deals possible and ensuring that your client doesn’t need to go elsewhere to finance their assets.

Mr Edwards advises brokers who are interested in asset finance to look into Pepper’s products and understand what’s on offer.

“With asset finance, the customer expectation is that they can have it turned around in 24 hours – so knowing the product means you’re going to give your customers the answer correctly the first time. If you have to keep going back and forward, that will ruin the customer’s confidence in the broker as a credible representative for them in the future for any future loans.”

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