In the market for a car? Understand your finance options and you could get behind the wheel sooner than you think.
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Getting a car loan
First thing's first – know your budget
Are you looking for a car to last you a long time, or a smaller, run around car you’ll only keep for a few years? This will probably influence how much you’re willing to spend.
You also need to know how much you can afford to spend. Your savings, debt and income will determine how much you could borrow and what you can afford in repayments.
Getting a loan from a bank
A personal loan enables you to apply to borrow funds before you buy the car and then pay it off in instalments once the loan is approved and funded. Personal loans come with a range of benefits which could make them a suitable finance option for you.
Negotiate a better price
Having finance sorted before you buy a car gives you peace of mind knowing that you can pay the full amount and avoid spending more than planned.
Know exactly what your repayments will be
You can have greater peace of mind with a fixed interest rate on your personal loan. A fixed rate stays the same for the life of the loan, so your repayments will too.
Make extra repayments to pay off the loan faster
If you come into spare cash to make extra repayments, you could own your car sooner.
Keep in mind that you might need to pay an early repayment fee if you pay off the loan before the end of your loan term. It differs for each loan and provider, but some only charge a couple of hundred dollars – so the benefits of paying early probably won’t be cancelled out.
No balloon payment at the end
Personal loans might come with a higher interest rate than what’s offered by a car dealer, but the upshot is that you won’t have an additional large lump sum called a balloon payment, which is sometimes due when your loan term is up.
Use your car to reduce the interest rate
Some financial providers let you use your car as security to get a lower interest rate.
Our fixed rate Secured Car Loan lets you use your car – even the one you’re looking to buy – as security to get a lower rate than our other personal loans.
Getting finance from a car dealer
Finance options from car dealerships can appear to have lower repayments than other financial providers, but they could end up costing you more in the long term.
Different car, different interest rate
You could get a different interest rate depending on the car make and model, your credit history and your income. This means you might get a higher interest rate if you’re not spending a fortune on a car or earning over a certain amount.
Paying off your loan early might not be possible
You might be on a low interest rate, but you could find yourself locked into a loan for a certain amount of time. And paying a loan off sooner than the loan term could result in extra fees.
Balloon payments
A car dealer might give you a portion of your loan interest free, resulting in lower repayments. Sounds great, right? Except that portion is owed at the end of the loan term in one payment – called a balloon payment.
So once you pay all your monthly repayments, you could still owe thousands of dollars – all due in one payment. If you aren’t prepared for the balloon payment, you might face extra fees and have to finance that amount at a higher rate.
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The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. Also to the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accept no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.