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Don’t choose your car loan on rate alone

The start of a new financial year doesn’t just bring clothing sales, it also heralds the start of some excellent ‘run out’ car sales.

The start of a new financial year doesn't just bring clothing sales, it also heralds the start of some excellent ‘run out' car sales.

If you have been in the market for a new car, these ‘run out' sales offer the perfect opportunity for you to snap up a new vehicle at an incredibly competitive price. 

When buying a new car, most of us will need to take out a loan in order to finance the purchase. While a lot of people will just get a loan through their chosen car dealership, this isn't the only way to fund a vehicle purchase. 

You may not even realise it, but your local mortgage broker can help you obtain car finance. In the same way your mortgage broker can help you secure a sharp home loan interest rate, they can also help you snag a very competitive car loan. 

Of course, when selecting a car loan, it is important to look beyond the interest rate. While the interest rate will certainly play an important role in your final decision, it isn't the only factor at play. 

We have identified some of the other important factors to consider when selecting a car loan. 

Fixed or Variable rate: If you are looking for certainty around your car loan repayments, it might be worth considering a fixed rate loan. But while fixed rate products offer interest rate security, they often lack other features such as repayment flexibility. Some lenders will allow you to prepay your loan, while others will not – so make sure you read the fine print before making any final decisions. 

Loan fees: There are many kinds of car loan fees that borrowers may incur, these include establishment fees, loan service fees, late payment fees, and (potentially) prepayment fees. Your local mortgage broker can provide a full list of features and fees associated with car loans and advise you on the best product for your financial needs.

Loan Repayments: When taking out a car loan, many of us make the mistake of focusing purely on the low interest rate, rather than our regular repayments. Instead of just looking at your interest rate, look at your repayments and make sure you are comfortable with the cost. When choosing a car loan product, you can also select how frequently you would like to make your car repayments – be it weekly, fortnightly or monthly. 

Loan Term: The length of a car loan is important to consider, as it will determine what your regular repayments are and how much interest you will pay over the life of the loan. Generally speaking, car loans will last anywhere from 12 months to 7 years. The shorter your loan term, the less interest you will pay, but the higher your regular repayments will be. When choosing your car loan term, pick something that suits your financial circumstances.


Posted in: Asset finance

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