Navigate your car loan like a pro
Ready to upgrade your car, but don't want to wait for your savings to grow? A car loan could be the right choice to help you move forward. Here’s what you need to know about car loans to be confident you’re driving away with the right deal for you.
Finding a car loan
Shopping for a new car might be fun, but navigating your way through the finance details can be daunting. Here’s a breakdown of the elements.
- · Loan amount. When calculating the amount you want to borrow, make sure you can repay the loan. Tally up your income and expenses, remembering to include car insurance, registration and running costs.
- · Term. You can repay your loan over one to seven years. The longer the term, the lower the monthly repayments – but you’ll pay more interest.
- · Interest rates. Fixed interest rates are set for the loan term, so they’re more predictable than variable rates, which increase or fall with market fluctuations. When comparing car loans, make sure to look at the comparison rate, which combines the advertised interest rate with any fees and charges, so you understand the total amount you’re committing to.
- · Secured versus unsecured. With a secured loan, you can usually get a lower interest rate by using your car as guarantee. Unsecured loans carry higher rates, as lenders have no asset to sell if you default.
- · Repayments. How much do you want to pay each month? Our repayment calculator can help you work out a schedule that suits your budget and lifestyle.
As an example, if you have a secured car loan for $30,000 over 3 years at 8.49% interest, you could expect a monthly repayment of $946.89.
If that doesn’t suit your budget, the same loan over seven years would mean a monthly repayment of $474.94. It will, however, cost you $5,807.33 extra in interest over the term.
Applying for a car loan
Once you’ve found a loan, you can apply online. The lender will usually confirm your approval within a few days, after which you’ll have a set period to find your dream car.
Once you’re ready to purchase, you’ll submit the dealer’s invoice to your lender, who’ll in turn send you a contract. When that has been signed and returned with proof of insurance, the lender will forward the funds, often as a bank cheque.
When you’re buying a car, keep in mind that the price displayed on the windscreen is never the real cost. You’ll also need to factor in additional funds for items such as registration, insurance and, of course, running costs. Spend time shopping around for a suitable car loan and insurance so your dream car doesn’t become a nightmare.
Our personal loan calculator can help you choose the right loan for your needs. Remember to check the ‘car loan' option in the search and compare box at the top of the page and try changing the options.
Compare car loans to find a loan that suits your needs.