Author: rdelavictoria

  AI has quickly gone from an emerging technology to a mature one, with its impact being felt in just about every industry. Much of the discussion around AI is eclipsed by anxiety and concern about the prospect of potential job losses, as experts fear the impact of AI’s often superior performance over human performance in many sectors.  

However, the conversation is evolving, and fear is slowly turning to deeper understanding and acceptance that, while AI will inevitably mean certain jobs will be more efficiently and cost-effectively carried out by machine-learning technology, in other sectors it will also lead to new jobs and resources being created and required in businesses. Furthermore, tech experts say that AI can potentially free up humans to do more strategic, higher-level work and augment many business functions.   

Humans will still have an important role in shaping and guiding the technology. Forbes magazine cuts through some of the confusion and moral panic around the ‘AI revolution’ and cites evidence for improvements to business: ‘revolution’ is actually a 60-year evolution of the use of increasingly sophisticated statistical analysis to assist in a wide variety of business decisions, actions, and transactions. It has been called ‘data mining’, ‘predictive analytics’ and, most recently, ‘data science’.  Last year, a survey of 30,000 American manufacturing establishments found that “productivity is significantly higher among plants that use predictive analytics”.  

Take the world of auto and equipment finance as a prime example: AI is already being adopted in the analysis and collection of data, creating a more streamlined, efficient and more user-friendly journey for the borrower and for brokers. After all, AI is simply learning from the data.  

How will AI benefit the end user exactly?  

Today’s consumers need speed and convenience in virtually every experience. They are busier, contend with more distractions and, as a result, are less willing to wait than in years past.  

In an increasingly competitive lending landscape, it is essential that lenders optimise decision-making for efficiency and effectiveness to better serve borrowers.    

Put simply, AI can enhance the customer experience in three main ways:  

• Make the customer journey easier and improve the customer experience
• Remove biases in decision making  
• Detect fraud.  

AI set to improve the customer journey at Metro 

Metro is moving forward at pace with its AI plans to improve the lending experience for its customers and brokers.   

The company has recently employed David Bridges in a newly created Chief Information Officer (CIO) role with an AI rollout forming a significant part of his remit. Other resources have also been deployed by Metro to formally progress the technological and AI transformation program of the company.  

David says: “Our plans to deploy AI into our systems will ultimately reduce the time and number of touchpoints for customer requests and processing, approvals and complaints.”

Metro will have a platform to collect more data, known in AI as a Large Language Model (LLM), to create a complete customer identity and profile that will create the streamlining and efficiencies across the lending processes.   

Metro’s Head of Servicing, Raj Kripal, says the company’s AI plans will lead to a more tailored approach to customer service.

“With the new LLM, we can tailor a response based on the data collected to build on our features and this will improve the novated leasing experience for customers. With this technology we can streamline credit assessment and complaints management.

“We are leveraging AI to recommend specific Metro products to make for a more personalised recommendation and to make life easier for our customers,” Raj says.

Why is Metro adopting AI?

Metro is going full steam ahead with AI because it sees the opportunity and potential for digital transformation to enhance the services it provides and to capture wider audiences. The obvious reason which has already been covered is the speed with which operations can be carried out through AI deployment. But there are other clear advantages.   

Research from the London School of Economics and Political Science shows the need for accelerated digital transformation by brands and organisations to meet Gen Y and Gen Z expectations. These cohorts display a lack of tolerance for slowness in communication, a frustration with legacy solutions and the inability to expediently source information.  

“We are actively targeting Gen Z with this technology, as we see AI’s appeal to younger audiences who increasingly seek a more automated, digitised approach to finance, and we want to capture more of that market,” Raj says. 

Metro emphasises that automation and digitisation and high-quality customer service are not mutually exclusive.

David says: “AI will enhance the SME experience, create a more tailored broker experience with innovation in operating systems, without replacing the human-to-human customer service experience – which is Metro’s major differentiator in the market.

“Leveraging AI for a speedier and more personalised customer journey is human-centric and that is at Metro’s core.” 

At Metro, as a leading provider of asset finance, consumer car loans and novated leases, we take pride in being a reliable, resourceful and innovative alternative to traditional bank lenders. We lend $1.5-2 billion per year through an Australia-wide network of specialist brokers and salary packagers. Our team drives this success and upholds the values that make Metro a great place to work and do business. We foster trust, open communication, collaboration and cross-training opportunities.

But don’t take our word for it. We would like to introduce four valued team members, who o explain why they came to Metro and stayed. From a career-driven credit analyst to innovative, people-centred Business Development Managers, and our ever-evolving social committee chair, these are some of the people who make Metro unique.

Julia Thorn, Credit Analyst, Metro employee since January 2021. Moving sideways, then upwards: Julia Thorn doesn’t wait for opportunities to find her, she goes looking and takes control.

“Before coming to Metro, I worked with another financer for more than four years. It was extremely difficult to change departments or obtain credit training while I was there. I spent my time being the best employee I could possibly be, then, as a last resort, decided to change employers to gain the experience I was after.

“I moved sideways into a similar role at Metro and after 12 months, I was promoted to a Credit Analyst role, then recently to the ‘big ticket’ credit team . This new role increased my exposure to complex deals and requires more in-depth analysis. A typical day includes decisioning deals, taking calls from brokers, and workshopping potential deals that don’t fit within our standard policy requirements which require additional risk mitigation, structuring and information. I also review variations to existing loan contracts such as changes to asset details or guarantee removals.

“Throughout my time at Metro, my managers supported me to develop my knowledge and skills. I’ve had opportunities to work on projects with other departments and attend Metro and industry events, sometimes interstate. Senior staff take the time to train you and generously share their knowledge. Managers want to see you succeed. “I want to keep learning and expand my lending knowledge to other market segments. My experience showed me that you need to seek out and take advantage of learning opportunities as they are not always made available to you.”

Bethany Jolley, Project Coordinator and Social Committee Chair, Metro employee since 2019: From fitness goals and short courses to moving country, home and office, Bethany Jolley is always looking forward.

“I enjoy learning and I am doing it constantly. Before coming to Metro, I was an apprentice for a mortgage brokerage in England, then an advisor at a bank. When I moved to Australia, I got a temporary job with Metro before a permanent opportunity became available. I started as a Customer Service Associate and dedicated that time to learning the business and its systems. I took on extra tasks, showing my dedication and willingness to learn, and was promptly promoted to team leader. “As a team leader, I built on my stakeholder management skills and was exposed to servicing projects, which lead me to my current Project Coordinator role. Project management was not something I had thought about before coming to Metro. I’m dealing

with stakeholders of higher seniority than me and I have had to learn stakeholder management from a different perspective. I get to know stakeholders’ interests, and their influence and impact for every project.

“I have since completed a short course in project management, which motivated me to strive for a Diploma of Project Management. I completed and passed my diploma in May, my next goal is to obtain a university degree and begin to lead my own projects at work.”

“Working at Metro has opened my eyes to a different career path. It motivated me to do further study, and as a side hustle I am the Social Committee Chair. I’ve moved offices and home at the same time, kept fit and ran my first 10km. Metro has a great culture. Management is supportive and there is opportunity for career progression.”  

Brent Potts, Business Development Manager, Metro employee since June 2019: Innovate and accommodate: from building consumer products to providing voiceovers for instructional videos, no job is too big or small for Brent Potts. “My family worked in stock broking and finance, so I was exposed to the industry growing up and always knew it was where I wanted to work. I love helping businesses grow and seeing the transformation from a small operation to a large company. Being a business development manager means I am on the frontline, finding funding solutions so that businesses can gain income-producing assets.

“I started out in Metro’s Customer Service team and, with the support of my managers, have worked my way up to Credit Analyst, then Consumer Sales Specialist and now BDM for Queensland. The industry is constantly changing and being in the sales team means you need to think ahead to develop products and stay at the forefront of innovation.

“Innovation is one of the greatest challenges of the industry, with every finance company trying to outperform each other. Metro’s management team listens to key stakeholders and makes changes quickly in an evolving market. Being involved in building our consumer car loan product would have to be my greatest career achievement so far. It was a big and difficult task, but seeing the transformation from having no consumer product to having consistent consumer deals coming in each week has been rewarding. I get to be involved in so many great projects, some of which I could never have foreseen. I helped put together instructional videos for our brokers about the electronic document process and part of that was doing the voice overs and putting together marketing materials. “Every day is different. That’s what I love most about my role.”

Jessica Clarke, Business Development Manager, Metro employee since 2018. People first: Strong relationships inside and outside of work are key to Jessica Clarke’s career satisfaction and success.

“Strong relationships are key to a successful career in this industry. I enjoy forming relationships not only within the company but outside of it through our broker network. It’s nice to be able to see things from a different perspective. You get closer to the action, so to speak. In my role as a BDM, I meet brokers in person at their office, a cafe or a local watering hole to discuss what is working, what is not working and anything that we can do to help. “I would say making connections has been one of my greatest career achievements.  Outside of that, one of my proudest moments was being maid-of-honour at my best friend’s wedding.

“I’ve been fortunate to have been promoted twice at Metro by showing initiative and expressing interest in products and pathways that Metro was considering introducing or expanding on. I proved that I was ready and willing to dive into an area that was unknown to me. Metro has unwavering confidence in its people. They are open to ideas and opinions, regardless of your title or seniority. It’s a very cohesive working environment.

“Finance and lending will always experience challenges because they are heavily aligned with economic conditions, but all you can do is all you can do. You need to be prepared to navigate the uncertain times and support your brokers and clients with consistent, competitive offerings.”

When you’re in the market for a new car, you’ll likely encounter various financing terms that may not be entirely clear. A common term that often comes up is ‘balloon payment’. While it might sound complex, it’s actually an important concept to grasp for anyone considering a car loan.

In simple terms, a balloon payment is a large sum due at the end of a car loan, after making smaller monthly payments throughout the loan term. This setup can make your monthly budgeting easier, but it’s crucial to be prepared for that final, larger payment.

In this article, we will explore the balloon payment car loan: what it is, how it affects your loan, and most importantly, how it fits into your financial planning.

What is a Balloon Payment?

In the context of a car loan, a balloon payment is a large payment due at the end of the loan’s term. Unlike traditional auto loans, where each instalment is the same, a balloon payment car loan will have smaller monthly payments. However, this comes with the catch of a much larger final payment.

Balloon payments vs regular loan payments

When financing a car, you generally have two main options: a traditional loan or a loan with a balloon payment. Before you decide whether you should pay a balloon payment on your car,  it’s important to understand the variations between balloon payments vs regular loan payments.

1. Payment Structure
   Regular Loan Payments: In a regular car loan, you pay back the principal amount plus interest in equal monthly instalments over the loan period. The loan is also fully amortised, meaning when all monthly repayments are paid back, the loan will be paid out. Balloon Payments: With a balloon payment car loan, you still pay monthly, but these payments are significantly lower than they would be with a regular loan. A large portion of the loan is then deferred to the final payment – the balloon payment.
2. Interest Rates
   Regular Loans: Typically, traditional car loans have fixed interest rates, meaning the interest rate remains constant throughout the loan term.
   Balloon Payments: A balloon payment car loan also typically has fixed interest rates, but the overall interest paid might be higher due to the structure of the loan.
3. Total Amount Paid
   Regular Loans: The total amount paid over the life of a regular loan is the sum of all monthly payments, which includes the principal and the interest.
   Balloon Payments: Although the monthly payments are lower, the final balloon payment can result in a higher total amount paid over the life of the loan when compared to regular loan payments.
4. Cash Flow Impact
   Regular Loans: These loans require a higher monthly outflow, which can be significant but is predictable and consistent.
   Balloon Payments: The lower monthly payments provide more immediate cash flow relief, but require careful planning for the large final payment.
   
5. End of Term Options
   Regular Loans: At the end of a regular loan term, the car is fully paid off, and the owner has no further financial obligations regarding the loan.
   Balloon Payments: At the end of the balloon payment loan term, you have the option to pay off the large final sum or refinance it.

How Balloon Payments Work

Imagine you’re financing a new car worth $20,000. With a traditional loan, you might pay this off in equal instalments over five years. With a balloon payment, you might pay smaller amounts each month, but at the end of the five years, you’re required to pay a lump sum, which might be as much as $8,000, to settle the loan. Understanding what the average balloon payment for a car is crucial for financial planning, as it gives you a ballpark figure to anticipate at the end of your loan term.

Benefits of Opting for a Balloon Payment

Are car balloon payments a good idea?

The answer to this question will vary greatly depending on your financial situation and goals.

Lower Monthly Payments

One of the most obvious benefits of a balloon payment is the lower monthly payments. The structure of the loan means that you pay significantly less each month compared to a regular car loan, which can be particularly advantageous for those who need to manage their monthly budget more tightly.

Flexibility in Budgeting

For individuals or families with fluctuating financial incomes, the flexibility of balloon payments can be extremely useful. With lower monthly outlays, you can easily allocate funds to other immediate financial needs or investments.

Access to More Expensive Vehicles

With the reduced monthly financial burden, a balloon payment structure can make more expensive vehicles accessible that may be out of reach with a standard loan structure.

Suitable for Short-Term Use

Balloon payments can be an excellent option for those who plan to use the car for a short period. If you anticipate a significant financial inflow in the future (like a bonus, inheritance or the sale of an asset), you can plan to clear the balloon payment with those funds.

Simplicity in Refinancing or Trading

At the end of the loan term, you have several options: pay off the balloon payment, refinance it, or trade in the vehicle. This flexibility can be particularly advantageous if you predict your financial situation will change.

Alignment with Financial Planning

For those with a clear financial plan, balloon payments can align well with specific goals or timelines. For example, if you know you will receive a lump sum at a certain point, like from a trust fund or retirement plan, you can time it with the balloon payment.

Risks of Opting for a Balloon Payment

While balloon payments can offer benefits, they also come with several risks that borrowers should carefully consider before choosing this type of financing.

Large Final Payment

The most significant risk associated with a balloon payment is the large sum due at the end of the loan term, which can be a substantial financial burden, especially if your financial situation changes unexpectedly. Failing to save adequately for this payment can lead to financial strain or the need to secure additional financing under potentially less favourable terms.

Higher Overall Cost

Balloon payment loans often can result in a higher total amount paid over the life of the loan. This is because, while the monthly payments are lower, the accumulated interest on the unpaid principal can result in more interest paid over time compared to a standard loan.

Risk of Negative Equity

There’s a risk of negative equity with balloon payments, especially if the car depreciates faster than you’re paying off the loan. Negative equity occurs when the value of the car is less than the amount owed, which can be problematic if you plan to sell or trade in the vehicle before the balloon payment is due.

Refinancing Uncertainties

If you plan to refinance the balloon payment at the end of the term, there is a risk that you may not get favourable terms. Refinancing options depend on various factors, including your credit score, interest rates at the time and overall market conditions.

Pressure on Future Finances

The need to make a large balloon payment can put significant pressure on your future finances. It requires careful planning and saving, which may not always be feasible due to unforeseen circumstances like a change in employment, health issues, or other financial emergencies.

Potential for Overextension

Opting for a balloon payment might lead to choosing a more expensive vehicle than what you can comfortably afford, based on the lower monthly payments. This can result in financial overextension, where too much of your income is tied up in debt repayment, leaving little room for other financial obligations or emergencies.

Balloon Payment Alternatives

The main alternative to balloon payments are fully amortised loans. This is a more traditional option where payments are structured to be made regularly over the term of the loan, eventually paying off the entire amount including interest.

How to Choose if a Balloon Payment is Right for You

Still unsure whether a balloon payment is the right option for you? Here are some key signs that may help determine whether a balloon payment is best for you:

• You want lower monthly payments
• You need more flexibility in your budget
• You are planning to own the vehicle for only a short period
• You are expecting a significant financial inflow (e.g. bonus or inheritance) to cover the large final payment
• You are confident in managing a larger payment at the end of the loan term.

Ready to Navigate Your Car Financing Options?

Take control of your car financing with Metro, where we specialise in personalised financing solutions that fit your lifestyle and budget. Whether you’re exploring balloon payments or seeking alternative financing methods, we can help you find the perfect match for your financing situation. Connect with a broker to start your journey towards smart car ownership with Metro.

There’s a noticeable buzz in the air for automotive enthusiasts in Australia. With the challenges of vehicle production delays and COVID-related shutdowns fading away in the rearview mirror, 2024 is gearing up to be a standout year. 

In 2023, electric vehicles (EVs) accounted for 8.4% of all new cars sales, a staggering 120% increase on 2022. The Electric Vehicle Council has estimated that there are now approximately 130,000 EVs on Australia’s roads.  As EVs continue to gain popularity, the Australian market is bracing for an influx of 34 new and innovative models set to hit the roads in 2024. 

While Tesla’s models have been the popular choice, more cars from brands like Volkswagen, Toyota, Polestar, BYD, and even Cadillac are joining the EV party, offering Aussies more choices, reshaping the perception and providing greater diversity and options for buyers.

New models in 2024

Selecting the right model might be a tough call with plenty of new cars hitting Australian roads this year. With an extensive range of options to choose from, it’s hard to know which one to finance or start saving for.

According to carsguide.com.au, here are some of new cars expected to arrive on our shores this year:

1. Toyota HiLux: Australia’s current best-selling model is set to get an upgrade with a 48-volt-assisted powertrain option that is anticipated to result in a 10% reduction in fuel consumption, making it ideal for fleet owners.
2. Lexus GX: Making its debut in Australia as a premium version of the Toyota Prado, this model is expected to be delivered in the first half of the year.
3. Jeep Avenger: Jeep’s first all-electric model, this is equipped with a 54kWh lithium-ion battery, offering a driving range of 400km.
4. Audi Q4 e-tron: This is expected to challenge Tesla’s Model Y and Volvo’s XC40.
5. Ford Mustang: Expected to arrive in the second half of the year, it’s anticipated to yet again become the best-selling sports car in Australia.
6. Kia Sportage Hybrid: Considered to be a compelling alternative to Toyota’s RAV4, this features a 1.6-litre turbo-petrol four-cylinder engine and a 44.2kW electric motor.
7. Mazda CX-80: While details are yet to be released, this model is expected to refine and enhance the features of the existing CX-60 and CX-90, aiming at Hyundai’s Palisade and Toyota’s Kluger.
8. Mitsubishi Triton: The all-time rival to Ford Ranger and Toyota Hilux has been refreshed, boasting a 3.5 tonne towing capacity.
9. SsangYong Torres: Entering the mid-size SUV market, it is hoped that the all-electric version will become available in Australia.
10. Kia EV5: This electric SUV is anticipated to become one of Australia’s most affordable EV.

Additionally, the Hyundai Ioniq 5 N is effectively challenging what we think about EVs by offering speed, affordability, and engaging driving experience. 

Comparative analysis: EV vs hybrid vs petrol

Making the right choice between models requires a thoughtful consideration of various factors, including technological advancements, performance metrics, cost-effectiveness, and environmental impact. While it’s essential to approach this decision rationally, your final choice should also align with your personal lifestyle.

The decision-making process involves striking a balance between the practical aspects of the vehicle and how well it fits into your daily life. Here is a summary of the key differences:

• EVs: More expensive upfront but cheaper to run, with lower maintenance costs and no road tax. Ideal for short to moderate daily commutes.
• Hybrids: Environmentally friendly with a combination of electric and fuel power, offering better fuel efficiency in everyday commutes, but peace of mind for the occasional longer distances.
• Petrol cars: Cheaper upfront, faster, and with widespread easy access to petrol stations. Ideal for commuters making unusually long journeys regularly.

While petrol cars maintain their popularity, EVs and hybrids represent the future. Interestingly, there are also currently around 12 different electric trucks available on the Australian market. This has sparked considerable interest among fleet owners, primarily driven by the technology’s potential to significantly reduce the total cost of ownership of heavy vehicle operations, and concurrently reduce emissions. As technology advances, more options are expected for both business owners and consumers.

Upgrade your driving experience

Whether you’re considering a fuel-efficient hybrid or an all-EV fleet for your business, Metro’s novated leasing options are designed to enhance accessibility. Also worthwhile to keep in mind is that the Australian Government introduced a fringe-benefit tax (FBT) exemption for EVs for private use, however, for plug-in hybrid vehicles this will only be available until 1 April 2025. This incentive is advantageous for those who can purchase an EV through salary sacrifice arrangements. 

With Metro, we put more Aussies in the driver’s seat to enjoy a sustainable and sophisticated driving experience.