Discover different Skoda finance options so you can drive away with the best deal
Looking to buy a Skoda? You'll need finance. Here's everything you need to know about the different Skoda finance options available.
Originally developed in the Czech Republic back in 1895, Skoda has gone from strength to strength throughout Europe and has enjoyed a successful introduction in other parts of the world. Skoda experienced increased visibility after being enveloped as part of the Volkswagen group in 2000 and, despite not having a presence in Australia for several years, has become a popular brand throughout the country after its reintroduction in 2007.
Popular models of Skoda available in Australia
Skoda vehicles currently available in Australia include the Rapid, Superb, Yeti, Fabia and the Octavia, with the latter being Skoda's consistently highest selling model throughout Australia.
How much does it cost to buy and run a Skoda?
Initial purchase cost
According to Redbook, the cost to purchase new 2018 Skoda models in Australia is as follows:
- 2018 Skoda Fabia from $16,990
- 2018 Skoda Karoq from $32,990
- 2018 Skoda Kodiaq from $46,290
- 2018 Skoda Octavia from $25,490
- 2018 Skoda Rapid from $23,990
- 2018 Skoda Superb from $43,690
According to information provided by the Australian Government's Green Vehicle Guide www.greenvehicleguide.gov.au, the Skoda Superb is the most fuel-efficient Skoda vehicle with a minimum urban fuel consumption of 5.6 litres per 100 kilometres. The Skoda Octavia ranks next, with a minimum urban fuel consumption of 5.7 L/100km, followed by the Skoda Fabia at 5.9 L/100km, the Skoda Rapid at 6.2 L/100km, the Skoda Yeti at 6.7 L/100km and the Skoda Karoq and Skoda Kodiaq, both at 6.8 L/100km.
Since the Australian Taxation Office defines a fuel-efficient car as one with a fuel consumption of 7 L/100km or less, all Skoda models available in Australia would meet the definition of a fuel-efficient car.
Compare car loans suitable for purchasing a Skoda
Other costs to consider
- Compulsory third-party insurance (CTP). An insurance legally required in Australia, CTP protects third parties who may become injured or suffer damage as a result of your driving.
- Insurance. While not legally required, car insurance can protect your asset in the event that your car is stolen, damaged or involved in an accident.
- Ongoing servicing and repairs. If purchasing a new car, logbook servicing is required under the terms of most new car warranties. All motor vehicles, regardless of their age, should be serviced on a regular basis to prevent small issues from becoming big problems, and the costs of ongoing servicing must be factored in when considering the total cost of purchasing and maintaining a car.
- New car extras. The advertised price of a motor vehicle is generally the cheapest possible price, so be prepared to pay extra for add-ons like metallic paint, ABS, leather seats, automatic transmission and a higher engine capacity.
- Stamp duty. A government tax payable on the transfer of ownership of a car, the way that stamp duty is calculated varies between Australian states and territories. Depending on the value of the car and other factors, stamp duty can be a considerable expense and one that must be taken into consideration when calculating the total cost of a car. Stamp duty applies to the purchase of both new and used vehicles and is a tax that is designed to cover the cost of the transfer of registration of a vehicle from the seller to the buyer. Stamp duty can sometimes be known as motor vehicle stamp duty, vehicle registration duty and motor vehicle duty. Calculate how much motor vehicle stamp duty you might need to pay based on your location in Australia and other factors.
- Dealer delivery. If purchasing a new car, dealer delivery refers to the cost of delivering the car from the manufacturer to you. The amount of dealer delivery payable can vary significantly and will be set at the discretion of the dealer.
- Finance costs. See the next section for a detailed breakdown of different Skoda finance options and the costs associated with each.
What types of Skoda finance options are available?
After you've chosen the perfect Skoda for you, it's time to consider your Skoda finance options. While there are plenty of different ways to finance the purchase of a car, the best car finance for you will ultimately depend on your individual circumstances.
The following types of Skoda finance options could be available to you:
Secured car loan
With a secured car loan, the loan itself is secured by the value of the vehicle. This means if you default on the loan repayments the lender can repossess your vehicle. As with other forms of secured finance, a secured car loan poses less risk to the lender and typically attracts interest rate discounts.
Unsecured car loan
If you don't want to put your car up as security for the loan, an unsecured car loan will give you more freedom to do what you choose with the loan funds but will usually come with higher fees and interest rates.
A chattel mortgage is a form of secured car finance for business buyers. Small businesses should also keep in mind the Australian Government's small business tax break which was renewed in the federal government's most recent budget.
A form of salary sacrificing, a novated lease is a three-way contract between yourself as the employee, your employer and the car dealership. Lease payments are taken out of your before-tax salary, effectively reducing your taxable income. At the end of the lease term, several options will be open to you including entering into a new novated lease agreement, refinancing the current agreement or purchasing the car outright. A novated lease tends to benefit employees with a high income and relatively high annual kilometre rate.
Pre-approved car loan
With a pre-approved car loan, you'll know exactly how much you can borrow before you go out test driving cars and negotiating the best deal. While not all lenders offer pre-approved car loans, having a good idea of your car loan limit can help you when negotiating.
Commercial hire purchase
A popular option with self-employed businesspeople, a commercial hire purchase involves regular repayments that reduce the balance owing on the car, allowing you to purchase the car outright at the end of the hire purchase agreement.
If you have sufficient funds in an offset account in your mortgage or in a redraw facility, consider using these funds to purchase the vehicle. The advantage of this method is that home loan interest rates tend to be lower than interest rates for car loans or personal loans; however, redrawing from your mortgage means that you would essentially be paying off your car over the remaining term left in your mortgage, which could be up to 25 years. It is important to consider how much interest you will end up paying on the redrawn amount in the long term before deciding whether to redraw your mortgage.
If you think you could get a better mortgage deal by refinancing elsewhere, you may be able to free up some equity in your home during the refinancing process and use these funds to purchase your car. Mortgage refinancing can be a good option if you have built up significant equity in your home loan, or if the value of your property has increased since the mortgage was taken out. Be mindful that you will probably need to have a new valuation taken out on the property, and that you may incur early exit or refinancing fees when switching home loan products.
Before you use a credit card to purchase a vehicle, consider how long it will take you to pay off this new credit card debt and the interest that will accrue in the meantime. With credit cards having notoriously high interest rates compared to other forms of lending, you may find that what started out as a convenient purchase quickly turns into a much more expensive exercise. If you're thinking of applying for a new credit card to purchase a car, make sure you compare credit cards and take into account all fees and charges in addition to the credit card interest rate.
Skoda dealer finance
Skoda provides car finance through its Skoda Financial Services branch, with several different finance products available. Find out more about how dealer finance compares with a traditional car loan.
- Skoda Choice. Skoda Choice guarantees the future value of your car at the end of the finance term. You set the deposit, the term of the finance agreement and a yearly kilometre limit, and then choose whether you want to retain, trade-in or return your Skoda at the end of the finance term. If you choose to retain the car, a balloon payment will be set as part of the finance agreement and is payable (or can be refinanced) at the end of the loan term. If you choose to trade in your Skoda for a new Skoda, any equity in the vehicle can be used towards the purchase of the new vehicle. Should you choose to return your Skoda at the end of the finance term, no further amounts are payable provided fair wear and tear and agreed kilometre limit requirements have been met.
- Consumer loan. Skoda offers consumer loans over a set term with regular repayments of principal and interest. An initial deposit or balloon payment can be included within the loan agreement to reduce the amount of your ongoing repayments. Loan terms range between one and seven years, with a fixed interest rate applicable and no ongoing or annual fees.
- Finance lease. Skoda offers finance leases in which you do not own the car but have exclusive use of the car for the agreed term while making regular lease payments. At the end of the lease term, you can return the car, upgrade to the latest model, or pay out or refinance the residual amount.
- Business finance. Skoda offers specialised finance solutions for business customers, including hire purchase, finance lease or chattel mortgage. All three business finance solutions involve a balloon payment at the end of the finance term. A chattel mortgage involves an initial deposit, tax-deductible depreciation and interest, and GST payable on the cost of the car. A finance lease has no deposit but does involve tax-deductible repayments but no tax-deductible appreciation or interest. GST is payable on the repayments but not on the cost of the car. In a hire purchase arrangement, a deposit is payable, and depreciation is tax-deductible while repayments are not. Interest is tax-deductible, with GST payable on both repayments and the cost of the car itself.
Factors to consider when comparing Skoda finance options
When comparing finance options, consider the following:
- Interest rate. One of the biggest considerations to make when you compare car loans is the interest rate offered, but this shouldn't be the only factor you consider.
- Loan flexibility. If loan flexibility is important to you, for example if you want to pay off your loan early or upgrade to a newer model, check to see how flexible the loan terms are or if penalties will apply for early repayments.
- Loan amount. Consider the full cost of purchasing the car, including any extras or customisations, dealer delivery and stamp duty, and make sure that the loan amount will be sufficient to cover all costs.
- Balloon payment. Many car finance options involve making a residual or balloon payment at the end of the loan term. It is important to make sure that this amount will be affordable for you and won't outweigh the value of the car at the time.
- Repayment frequency. Ensure that the repayment frequency suits your circumstances, for example, your salary pay period if you are an employee or your business's cash flow for business buyers.
- Fees and charges. Does the loan include an application fee or other ongoing fees? All fees must be considered when calculating the total cost of the loan.
- Loan term. Car loans usually have loan terms between one and seven years, while non-standard forms of car finance like using a credit card or redrawing your mortgage could involve a different loan term.
How to apply for finance to buy a Skoda
The process of applying for finance will vary depending on the type of loan you choose and whether you are a business or private buyer.
To be eligible for vehicle finance as a private buyer, you will need to meet the following minimum requirements:
- Australian citizen or permanent resident
- Older than 18 years
- Earning a steady income
In general, as a private buyer you will need to provide the following documents when applying for finance:
- Proof of ID
- Proof of income and employment
- Details of other assets and liabilities
- Ongoing expenses and credit card limits
- Details and cost of the vehicle you intend to purchase
Frequently asked questions
How often does a Skoda need to be serviced?
All Skoda models will benefit from a lubrication service and inspection roughly every 16,000 kilometres or every 12 months, whichever occurs sooner. Many Skoda models include an onboard computer which will indicate when a service is recommended depending on the engine and fuel types. New Skodas will come with a recommended service schedule which should be adhered to in order to maintain your warranty.
Should I buy a used or new Skoda?
There are advantages and disadvantages either way and ultimately it will come down to your budget and your personal preferences. Used cars are obviously cheaper but can come with cosmetic or mechanical problems, while new cars come with a factory warranty but are more expensive and are quick to depreciate in value.
Can I make extra repayments on my car loan or pay it out early?
This will depend on the individual lender and loan product you choose. Some loans are more flexible than others, and some lenders will charge an early exit fee if you pay out your loan early. If this is something you would strive to do, check which lenders allow for early repayment without penalty before you apply.