Car loans

Get a car loan with affordable monthly instalments 

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 offering advice on choosing a car – we’re going to start by 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 financial 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

The importance of car loans

Getting a car loan is often essential when purchasing a car in Australia. Cars can be expensive, and you may not have the full amount upfront.

A car loan enables you to get the car you need and pay it off over time, usually with interest. These loans can make buying a car more affordable by breaking up the total cost into smaller payments spread out over several months or years.

Overview of the car loan process in Australia

The process of getting a car loan typically involves several steps. First, you’ll need to determine your budget by assessing your financial situation and figuring out how much you can afford to spend on a car each month.

Once you've done that, it's time to research lenders. There are various lenders available, such as banks, credit unions, and other financial institutions that specialise in providing auto loans. After selecting a lender and filling out an application form with all the necessary information and documentation, the lender will review your application before deciding whether or not to approve it. If approved, they will provide pre-approval for the amount they are willing to lend you based on their assessment of your creditworthiness.

Once pre-approved for an car loan, it’s time to select a vehicle that fits within your budget while also meeting your transportation needs. You'll then finalize loan details with your chosen lender before signing a contract that outlines specific terms such as interest rate, monthly payment amount, duration of repayment period etc. Finally – assuming everything goes well - you purchase the vehicle using funds from the car loan provided by your lender!

Determine your budget

Before you start looking at car loans, it’s important to determine how much you can afford to spend on a car. This will help you narrow down your options and avoid overspending. The first step in determining your budget is assessing your financial situation. You need to look at your income, expenses, debts, and assets.

Subtract your monthly expenses and debts from your income to get an idea of how much disposable income you have each month. This will help you set a realistic budget for your car purchase.

Assess your financial situation

To assess your financial situation, start by making a list of all of your monthly expenses and debts. This should include things like rent or mortgage payments, utilities, groceries, credit card payments, student loan payments, and any other bills or expenses that are regular and recurring. Next, look at your income.

Include all sources of income such as salary from employment, bonuses or commissions paid by an employer as well as any government assistance payments such as Centrelink benefits. subtract the total amount spent on bills and living costs from the total amount earned monthly - this is what's left over for entertainment activities or savings.

Consider additional costs such as insurance, maintenance and fuel

It’s important to consider additional costs beyond just the price of the car itself when creating a budget. You’ll also need to factor in things like insurance costs (including comprehensive coverage which many lenders will require), servicing & repairs (if applicable), and fuel consumption rates (how far does it go per litre/kilometre?) among other things that can add up quickly over time.

This means researching vehicles before buying them so that they do not exceed budget requirements for maintenance or fuel consumption rates as these can escalate the total costs of car ownership. If you're unsure how to do this or need help, then consulting a car finance professional can be helpful as they can provide valuable expert advice that takes all these factors into account.

Ultimately, it’s important to create a realistic budget based on your financial situation and needs - not just what you want in a car. Straining the budget to get all the bells and whistles on a vehicle is ill-advised as it may cause stress down the road.

Do I choose a new or used vehicle?

Although new cars have the advantage of coming with a 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 then 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 your insurance costs might also be higher.

Let’s talk: Budget

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 then you need to make use of an affordability car loan calculator to see how much you can afford. This will let you know how much you can afford to pay every month for your car loan and then give you a very accurate indication of the total purchase price that you are looking at.

Research lenders

Before committing to a car loan, it's important to research lenders to ensure you're getting the best deal. There are many factors to consider when doing so, including interest rates, fees, and terms. Interest rates are the percent of your loan that you will pay back in addition to the original amount borrowed.

Fees vary depending on the lender but can include application fees, origination fees, and early repayment fees. Terms refer to the length of time you have to repay your loan.

Compare interest rates

Interest rates can vary greatly between lenders, even for those with similar credit scores or financial situations. It's important to compare interest rates between lenders and find one that fits your budget. A lower interest rate means less money paid in addition to the original amount borrowed over time.

Fees

In addition to interest rates, it's important to consider any additional fees associated with a car loan. These can include application fees or origination fees charged by a lender for processing your application or establishing your account. Other fees may include prepayment penalties if you pay off your loan ahead of schedule or late payment fees if you miss a payment deadline.

Consider customer service and reputation

Customer service and reputation are also important factors when researching lenders for a car loan. Consider reading reviews online from other customers who have taken out loans from that particular lender. See what others have said about their experiences regarding customer service and satisfaction with their loans.

Researching different lenders before committing to a car loan is an essential step in ensuring that you get the best possible deal for your financial situation. Comparing interest rates and considering additional costs such as fees are crucial steps towards finding a trustworthy lender who is right for you.

Gather necessary documents

Why are documents important?

One of the most important aspects of getting a car loan in Australia is having all the necessary documentation ready to go. Without these documents, lenders won’t be able to properly assess your application and determine whether or not you qualify for a loan. By having all your paperwork in order, you’ll be able to speed up the loan process and increase your chances of being approved.

Proof of income

When applying for a car loan, one of the most important things lenders will look at is your income. This helps them determine whether or not you’re capable of making regular payments on the loan. You may need to provide recent payslips or tax returns as proof of income.

Employment history

Lenders will also want to know about your employment history, including how long you’ve been employed and any previous jobs. This helps them get an idea of your stability and ability to maintain a regular income.

Credit score

Your credit score plays a big role in determining whether or not you’re approved for a car loan in Australia. If you have a good credit score, lenders may offer lower interest rates and more favourable terms. You can obtain a free copy of your credit report from various credit reporting agencies in Australia such as Equifax and Experian.

Identification

It’s important to have proper identification when applying for a car loan. This includes things like driver’s license, passport or other government-issued ID.

It's essential that all documents provided are current and valid at the time of application submission as that can delay the process if otherwise. By gathering these necessary documents ahead of time, you’ll be able to streamline the application process and increase your chances of being approved for a car loan in Australia.

Applying for pre-approval

Once you have done the initial research and selected the lender you want to work with, it is time to apply for pre-approval. It is a process where the lender assesses your eligibility for a car loan before you actually choose a vehicle.

The advantage of pre-approval is that it gives you a clear understanding of your budget which can help in the selection process. It also speeds up the final loan approval process once you’ve chosen your vehicle.

Applying for pre-approval requires providing certain information and documents about yourself, including proof of income, employment history, credit score, and identification. You may also be asked to provide information about any existing loans or debts you have.

This helps the lender assess whether or not you are a good candidate for a car loan and what type of interest rates and terms they can offer. Make sure to provide accurate information as any discrepancies could lead to delays in processing.

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.

Finding the right lender for vehicle finance

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.

You can get a car loan from almost any bank and credit union or use an alternative credit provider such as a car finance company or a peer-to-peer lender. One of the best ways to get a good idea of 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.

Understanding how to use the lender’s comparison rate

When comparing lenders 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 vehicle finance

• 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 vehicle to recover their money if you default on the loan.

Select a vehicle

After getting pre-approval for your car loan, it's time to start shopping for your dream ride! But before you get too excited about the prospect of owning a shiny new car, make sure you choose a vehicle that fits within your budget. Remember, you'll be making regular payments on your car loan for several years to come, so it's important to choose a ride that won't break the bank.

Choose a vehicle that fits within your budget

To determine which cars are within your price range, revisit the budget you created in step two. Be sure to factor in additional costs like insurance and maintenance. Once you've established how much you can afford on monthly payments and total loan amount, start researching vehicles that fit within those constraints.

You should also consider factors such as reliability, fuel efficiency, and resale value when choosing a vehicle. A reliable car will save you money on expensive repairs down the line.

A fuel-efficient car will save you money on gas over time. And considering resale value is important if there's even a remote possibility of selling or trading in the vehicle before paying off the loan.

When selecting a car, don't forget to explore all options like buying used or leasing instead of buying outright. These options may offer some financial flexibility while still allowing you to acquire your dream ride.

Finalise loan details

After you have been pre-approved for a car loan and selected your vehicle, it's time to finalize the loan details with your lender. This is an important step in the car buying process, as it will determine the specific terms of your loan and how much money you will be required to pay back over time.

The first thing you will need to do is negotiate the loan terms with your lender. This means discussing the interest rate, length of the loan, and any other fees or charges that may be associated with borrowing money.

Be sure to ask questions if you don't understand something or if there is something you don't agree with. Remember, this is a negotiation, so don't be afraid to push for better terms that work for both you and your lender.

Once you have agreed upon the terms of the loan, make sure to review all of the details before signing any contracts. Double-check everything from interest rates to payment amounts to ensure that there are no surprises down the line.

If there is anything that doesn't seem right or if you have any additional questions or concerns, now is the time to speak up. Don't sign anything until all of your questions have been answered and all of the details have been thoroughly reviewed.

The devil is in the detail

Finalising a car loan can be quite stressful as things can get complicated at this stage in negotiations as lenders try their best to secure their investment while buyers want favourable conditions on their end too. Negotiating a car loan usually involves getting quotes from different lenders and then presenting them to each other in order to bring down interest rates and stretch out repayment periods as much as possible. It's important not just focus on one aspect of a potential agreement when negotiating; instead consider everything involved such as fees structure (origination fee etc), prepayment penalties (if they apply), insurance requirements, and any other related terms or conditions.

The ultimate goal is to sign a contract that not only accommodates your payment capabilities but also does not take advantage of you in any way. Scrutinise every detail before signing the dotted lines as it could make all the difference when it comes to repaying the loan in full.

Purchase the vehicle

Now that you’ve gotten pre-approval for your car loan and have selected a vehicle that fits your budget, it's time to make the purchase. Before signing any paperwork, make sure to thoroughly inspect the car to ensure that it's in good condition. Check for any signs of damage or wear and tear, such as scratches or dents.

Take it for a test drive to see how it handles on the road and make sure there are no unusual noises coming from under the hood. If you're not comfortable with car inspections, consider bringing along a mechanic or trusted friend who can help you evaluate the vehicle.

Once you've decided that everything is in order with the car, it’s time to finalize your purchase. Use funds from your loan to pay for the vehicle and be sure to keep all documentation related to the sale.

This will include a bill of sale, registration papers, and proof of insurance. Remember that while getting a car loan can be an exciting time, it's important to remain level-headed during this process so that you don't rush into making any costly mistakes.

Use funds from the loan to purchase the selected vehicle

One of the benefits of taking out a car loan is that it provides you with access to funds that can be used specifically for purchasing a new or used vehicle. Once your lender has approved your loan application and agreed upon their terms, they will provide you with funds which can be used towards buying your chosen vehicle.

It’s important to note however, that taking out a car loan means borrowing money which must be repaid over time. This means making regular payments according to the terms of your agreement with your lender - failure in doing so could result in late fees or even defaulting on payments altogether.

Overall though, using funds from a car loan gives borrowers greater flexibility when shopping around for vehicles since they know exactly how much money they have available to spend. This can help alleviate any financial stress that may come with making a large purchase like a car.

Repay the loan

Once you have secured a car loan and purchased your vehicle, it is important to begin making repayments on time. Making regular payments not only helps you pay off your loan according to the agreed-upon terms, but it also improves your credit score over time.

Your credit score plays a major role in determining your eligibility for future loans, as well as interest rates and terms offered by lenders. Therefore, it is crucial to stay on top of your payments to ensure that you maintain good credit and financial standing.

The importance of regular payments

When it comes to repaying a car loan, consistency is key. Missing or late payments can have negative consequences such as fees, penalties, and even repossession of the vehicle in extreme cases. It is important to set up automatic payments or reminders to ensure that you never miss a payment.

Additionally, making extra payments or paying more than the minimum amount required each month can help you pay off the loan faster and save money on interest charges. However, be sure to check with your lender regarding any prepayment penalties that may apply before making extra payments.

Recap of important steps

Getting a car loan can be a lengthy process, but it is essential to ensure you have the necessary financing to purchase your dream vehicle. Remember that before starting the process, you should assess your financial situation carefully.

Determine your budget, research lenders to find the best interest rates and terms, gather necessary documents such as proof of income, and apply for pre-approval. Once you've completed these steps, select a vehicle that fits within your budget.

Make sure to consider factors such as reliability, fuel efficiency, and resale value. After selecting a vehicle, finalise loan details by negotiating terms with the lender and reviewing all contract details before signing.

When purchasing the vehicle using funds from the loan, do so with confidence knowing that you have taken all necessary steps to secure financing for your dream car. Remember to make regular payments on time according to agreed-upon terms so you can repay the loan successfully.

Remember that getting a car loan is not just about securing financing for a car; it's about making your dreams come true. Whether it's buying a new family car or upgrading your ride for added comfort and style during road trips or everyday commuting – getting approved for an auto loan is an important first step towards achieving this goal.

By following these essential steps when applying for an auto loan in Australia - from determining your budget and researching lenders to selecting a reliable vehicle - you'll be well on your way towards becoming the proud owner of a new or used car. It may take some effort along with careful planning but ultimately will lead you down path towards greater mobility and independence—enjoying every mile along the way!

Here are the top 10 tips for buying a car

1. Always do extensive research on both buying a car and getting finance
2. Always create a budget and stick to it
3. 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
4. Use a comparison rate to compare loans
5. Make use of a loan comparison website to compare specific deals
6. Always get pre-approval on finance before you go looking for a car
7. Don’t be afraid to negotiate with dealers for a better price
8. Research cars and always inspect them carefully – if you are not experienced in this take someone who is along with you
9. Never jump into a deal – always think about it and consider all of your options
10. Don’t be tempted to accept all the extras you get offered – do your research and remember that it all adds up
11. Always make copies of all paperwork and read everything carefully before you sign