What are dealers?

In Australian finance, 'dealer' usually means a motor vehicle dealer (new and used cars, trucks, motorcycles), an equipment or machinery dealer (construction, agricultural, medical, IT hardware) or a marine and recreational dealer (boats, caravans). Many introduce finance through an in-house finance division or by referring buyers to lenders and finance brokers, which is called dealer finance or point-of-sale finance.

The process is simple. You choose the vehicle or equipment, the dealer offers finance from one or more lenders it has a relationship with, you complete the application through the dealer, and if approved the lender pays the dealer directly at settlement. You then repay the lender under a chattel mortgage, finance lease, hire purchase or commercial loan. The convenience is one transaction; the trade-off is that you may not see the full market, and the terms may include dealer margin or origination fees.

A dealer introducing finance typically earns an origination fee or commission from the lender. On business purpose finance outside the National Credit Code a dealer may also add margin to the lender's base rate and keep the difference; on consumer car loans regulated by the Code, ASIC's flex commission ban stops a dealer setting or lifting the rate to increase its own commission. Dealers fund their own inventory with stocking finance, or floorplan finance: a revolving facility secured over the stock and repaid as units sell.

Credit licensing bites where the finance is consumer credit under the NCCP Act, which most business purpose truck and equipment deals sit outside. Where it applies, a dealer giving credit assistance must hold an Australian Credit Licence or act as a credit representative, and disclose how it is paid. Others rely on the point of sale exemption for retailers, a specific carve out worth checking with ASIC. Dealers also need state motor vehicle dealer licences and must comply with Australian Consumer Law.

Compare the dealer's offer with what a broker or direct lender can do before committing; the total cost is what matters, including fees, the rate and any bundled products. Ask how the dealer is paid for introducing the finance, and compare the total cost rather than the rate alone. Confirm which structure you are being offered (chattel mortgage, finance lease, hire purchase or operating lease) and what it means for tax and ownership.

Look hard at add-ons such as insurance, extended warranties and paint protection, which can inflate the total cost. If the finance includes a residual value or balloon, understand what you will owe at the end of the term and your options at that point. And verify that the dealer or its finance team holds the appropriate credit licensing if it is doing more than a simple referral.