You’ve found your dream car, now you need the money to pay for it. Most Australians will apply for vehicle finance and enjoy small manageable monthly repayments.
While most guides out there start talking about finance right away or start with offering you advice on choosing a car – we’re going to start on advising you to do lots and lots of RESEARCH!
While this guide will attempt to offer you accurate advice to help you find a perfect car with a great finance deal, if this is the start of your research journey it is important for you to continue by reading multiple guides, taking notes, talking to friends and family and asking as many questions as possible.
Where to do your Research:
- Ask your family and friends about their car buying experience and process
- Ask colleagues and acquaintances who may have special knowledge
- Read multiple guides online – almost all large banks and vehicle finance providers will have a car buying guide
- Read online reviews and advice columns to find out the things no one else will tell you
- Browse through your local newspapers or car magazines to get a feel for the options you have available and who the major lenders are
- Make use of a loan comparison site to compare a variety of car loans and personal loans
- Contact any lenders or dealers to ask them questions when their websites don’t do the job
Vehicle Financing Options
When you’re looking to buy a new car you have multiple finance options which you could make use of. Although we would all like to have sufficient savings to buy a car right out and save ourselves from having to pay interest not everyone has the available funds or time to save up and that’s where vehicle financing comes in.
You can opt to choose a car loan or a personal loan, however, you will almost always find that a car loan has a lower interest rate than a personal loan. Apart from these two bank or alternative lender options you can also choose to finance a car via dealership finance.
Finally you can choose to opt for a lease agreement which allows you to pay a financer a certain amount of money to make use of the car you want and then, at the end of the term you either buy the car outright or return it. These options can be understood by thinking of it as a rental which you can then either buy or move out of when your lease agreement expires.
Your Credit Score
Whether it’s a secured or unsecured loan or whether you’re looking to buy a new or used car you will have to have a decent credit score to qualify. Prior to starting your car shopping journey or even applying for preapproval always obtain a copy of your credit file and make sure that everything is correct and that you have a good score.
In addition you will also have to be an Australian citizen or resident, be over 18, have a driver’s licence, be able to prove income, offer full details on you income and expenses as well as any assets or investments.
New or Used Car
Although new cars have the advantage of coming with 3 to 5 year warranty and are very unlikely to break down or have any issues not to mention that they may be more fuel efficient or safer due to upgrades and innovation they depreciate at an incredibly high rate and will be worth anything from 40% to 70% of its original value at the end of the warranty period.
Another advantage of buying a new car is that new car loans carry a significantly lower interest rate and you will also be able to secure cheaper insurance in many instances. If you’re looking to buy a second hand car or, a showroom car, than you’re likely going to save a lot of money.
Many used cars still have their original warranty and offer you good value for much less. A disadvantage of a used car is that the interest rate charged on your loan will very likely be higher than that of a new car loan and you insurance costs might also be higher.
Let’s Talk Budgeting
Although most people will first think about the type of car they want and all the features that they simply must have, working out what you will be able to afford is the best place to start. If you’re buying a car using your savings then the rest of this guide won’t really help you out much and you should rather search for a car buying guide.
If you’re looking to have your car financed by a lender than you need to make use of an affordability calculator to see how much you can afford. This will let you know how much you can afford to pay every month towards you car loan and then give you a very accurate indication of the total purchase price that you are looking at.
Finding the Right Lender
Although buying a car may be a daunting task if you don’t really know much about cars or about vehicle finance, educating yourself and shopping around before making any hasty decisions is going to save you a lot of stress, heartache, money and time.
Once of the best ways to get a good idea on which lender is offering the best deal overall is to use a loan comparison website like Canstar, Mozo or Finder.
These sites have a good deal of information that can help you find out which lenders offer the lowest rates, the lowest fees, the best terms and the type of credit that will meet your needs.
Use the Comparison Rate
When comparing lender and loans always use their comparison rate rather than just their interest rate as this will not include any additional establishment and ongoing fees and will not provide you with a clear picture of what you will be paying.
Secured vs Unsecured
Secured loans can be either vehicle finance loans or personal loans that can be used to buy a car. Secured loans make use of the vehicle being purchased as security against the loan and, if you default on the loan the lenders can then repossess the car and resell it to recover their money. Secured car loans are the cheapest in terms of interest.
Unsecured loans are typically personal loans that can be used to buy a car and almost always carry significantly higher interest since the lender cannot then repossess your car to recover their money if you default on the loan.
Always get Pre-Approved
Pre-approval is one of the most important things that you need before going to view cars and before walking into any dealership as this will afford you the kind of bargaining power that you need to get a good price and a decent deal overall.
Here are the Top 10 Tips for Buying a Car:
- Always do extensive research on both buying a car and getting finance
- Always create a budget and stick to it
- Don’t forget that you will need to pay for the registration fee, stamp duty, delivery fees, car insurance and repairs if necessary so include these in your budget
- Use a comparison rate to compare loans
- Make use of a loan comparison website to compare specific deals
- Always get pre-approval on finance before you go looking for a car
- Don’t be afraid to negotiate with dealers for a better price
- Research cars and always inspect them carefully – if you are not experienced in this take someone who is along with you
- Never jump into a deal – always think about it and consider all of your options
- Don’t be tempted to accept all the extras you get offered – do your research and remember that it all adds up
- Always make copies of all paperwork and read everything carefully before you sign