Did you know that 90% of new cars in Australia were purchased under finance in 2021? Considering the growing share of finance commitments over the past decade, you might want to slide right into this strong trend when getting yourself a new vehicle.
There are various kinds of car loans catering to different needs. Here are five things to consider when selecting the right loan product.
Create a Budget
Choosing a car loan is like selecting any other type of loan – you’d want to go with the one you can afford. Knowing your buying power can minimise the risk of financial distress.
When setting your car budget, take these factors into account:
- Total cost – this includes out-the-door costs like sales tax, title and registration fees, insurance, gas, and other expenses related to owning a car.
- Monthly payment – consider the impact of the loan term, interest rate, and down payment on your monthly bill.
- Down payment – the bigger your down payment, the less your monthly bill will be.
- Total debt – consider other financial responsibilities you need to make every month, such as mortgage and credit card bills.
Used vs New Car
Some loan products cater exclusively to old or new cars, while others can be used to buy either. Therefore, knowing the type of car you want to get helps to narrow down the loan products that fit your needs.
Consider Different Types of Loans
Each type of loan has its features and terms. For example, a fixed rate loan has better predictability regarding payments than a variable rate loan, but the latter offers more flexibility than the former.
When choosing a loan type, consider these factors:
- Loan terms – short-term loans tend to have high monthly payments but offer fast capital, whereas long-term loans have lower monthly payments but have higher interest rates.
- Interest rates – secured loans have lower interest rates but require collateral, whereas unsecured loans impose no risk to personal property but offer smaller loan amounts.
- Balloon payments – some loans require a final lump sum paid at the end of the loan’s term that’s larger than all earlier payments.
Documentation Checklist
Having all the required documents ready will make your application process easier. Each loan product has its own requirements, but most of them generally include:
- Proof of identity
- Proof of income
- Credit history
- Proof of residence
- Proof of insurance
Use a Car-Finding Service
Buying a car through a car-finding service is easier than going into the car market on your own. Premium Car Search, for example, sources new, used, and commercial vehicles from across the country. The service is happy to arrange valuation and trade of your current vehicle, schedule test drives, and even deliver your chosen vehicle to your doorstep.
The key to finding the right car loan product is through research. Rushing the searching process can put you under financial pressure, so it’s best to take your time and consider all the available options carefully.
Not sure where to start? Reach out to Southstead Finance Broker Perth – we can make the process easy and less stressful for you! Southstead also partners with Premium Car Search to provide a smooth vehicle translation. Together, we can make your vehicle purchase easy and stress-free. Contact us on 0408 238 981 or amy@southstead.com.au.
Credit Representative 525543 is authorised under Australian Credit Licence 38928. Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.
