When you're searching for a car loan, the four factors that will decide how much you can get and how much you can repay are:

1) are the amount of the loan

2) the interest rate

3) the term of the loan

4) various fees and charges at the start and throughout the loan

This article guides you through the various fees and charges you will encounter in a car loan. The most common fees you might come across include:

  • The application and establishment fees
  • Annual or monthly fees (not all loans feature these)
  • Early repayment fees
  • Missed or late payment fees, and
  • Documentation fees.

If you head to a car loans comparison site to look at the fees lenders tend to charge, you'll see that establishment fees range from $0 to $500 and your monthly fee could be between $0 and $25. If you're late with a payment you could pay between $5 and $60 and if you pay the loan off early you could face up to $300 in penalties.

Look smart

These fees vary quite a bit, as you can see, so when you're looking at different loans, look at how much you'll pay overall in fees. Just because one loan has no establishment fee doesn't mean you won't pay $20 a month in maintenance fees for the next three, four or five years.

When it comes to choosing finance, whether it's a used car loan or money for a brand-new motor, it's always wise to look at the comparison rate, which tells you how much the overall cost is as it includes the fees and the interest rates.

Even then, if you strike lucky with the lowest car loan rates and fees going, you need to know what you'll pay in the event of a late payment or if you clear the entire balance early.

Your application or establishment fee

This is the fee you'll most likely see when you apply for your car loan. It's charged by the lender to cover the costs incurred when they set up each loan for the customer. Some lenders have eliminated these fees, however, so that they can look more attractive in a competitive market.

You may pay a higher fee if your car loan is unsecured, or you may pay nothing at all but have your interest rate bumped up by a notch. You might also see that your ongoing fees are higher than any others.

Your car loan PPSR fee

You may pay a Personal Property Securities Register (PPSR) fee upfront, although some lenders absorb this into the establishment fee. This covers the lender's cost for registering the security rights (or encumbrance) on the car. This is often around $25.

The ongoing fee

Your lender might charge an ongoing maintenance fee, which can be monthly, half-yearly or yearly. These are the fees to watch out for because although they're only small in relation to establishment fees, paying $20 or $25 a month can really rack up over four or five years - often reaching over $1,000.

Your documentation fee

This is also known as a statement fee and it pays for the administration work involved in creating your statement each month. Sometimes lenders include this in an ongoing fee.

Your early repayment fee

This is big and very unpopular fee for borrowers. If you pay off your loan early, or if you're refinancing a car loan to another lender, then you'll probably have to pay a fee. This is because your lender expected to receive your repayments for a set amount of time and expected a certain amount in total. They can't ask for the entire difference back, but they may well ask for some payment to soften the blow.

The amount of the fee will vary depending on the outstanding balance left, but you can expect to pay $150 to $200.

Missed payment fees

If you're late with a payment you might have to pay a late fee, although if you generally have a good record and you have a good reason for lateness, your lender may waive it.

Setting up direct debits for just after payday is the best way to avoid late payments, but if you know you'll be late one month, make sure you call the lender and talk things through before the due date.

If you have a balloon payment, make sure you're ready for it

This isn't actually a fee; it's a lump sum that you agree to pay the lender at the end of the term so that you can have smaller monthly repayments. Generally, balloon payments are between 30 and 50 per cent of the sale price, so it can be quite a large amount. If you find you don't have the balloon payment to hand when the time comes, you'll either have to sell the car or take out another loan. You need to think about whether you should have a balloon arrangement or not; using a car loan calculator is always a good move here.

Always read the small print

Ideally, before you sign on the dotted line. If there's anything you don't understand then ask the lender for clarification.

Beware the low or no-fee loans

These look great, but what about the interest rate? Many loans with low upfront costs will recoup that money somehow and it's usually drawn out and painful! You need to find low fees and low interest rates if you can'there's always a sweet spot somewhere, so do the maths, like this.

Imagine you're looking at two five-year $15,000 car loans and trying to work out which one's cheapest in the long run. The first loan has no upfront arrangement fee or ongoing fee and an interest rate of eight per cent.

The second has an upfront fee of $300, an interest rate of six per cent and a monthly fee of $5. You might think that the first loan is your best option, but wait.

The first loan means monthly repayments of $304, with a total spend of $18,240, whereas the second loan will result in monthly repayments of $290 and a total spend of $18,000 with the fees included. That's a saving of $240.

Use a loan calculator to work out what loan size you can afford and what you can afford to repay

A good way to assess the 'hidden' costs of a loan is to look at the comparison rate; if it's quite a bit higher than the advertised interest rate, then the fees are the culprit.

The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.