There are a lot of questions to consider when buying a car. While some are straightforward and can even be fun to answer, like what car make, model, and color, there are also more challenging questions to consider when it comes to financing the purchase.
Here are 9 crucial questions to consider before obtaining a car loan.
What’s my credit history?
It’s important to determine the status of your credit history before searching for car finance as it can be a significant factor in the interest rate that lenders will offer to you.
Therefore, understanding your credit history is crucial, especially if there are any negative credit challenges you need to address.
You can get a copy of your Equifax Credit Report once per year for free by visiting the Equifax Credit Report website.
What’s my budget?
Are you currently maintaining a household budget or simply keeping a rough estimate in your head? While purchasing a new car can be exciting, it’s crucial to ensure that you can comfortably meet your loan repayments both now and in the future. We suggest creating a detailed budget of your weekly expenses, as this can help you identify and eliminate unnecessary or excessive costs, making it easier for you to manage your repayments.
You can use MoneySmart’s Budget Planner tool to help create a comprehensive budget in just 20 minutes.
What car can I afford?
Your budget will play a crucial role in answering this question. It will determine the type of car you can afford to pay for each week.
While you may have your eyes set on the latest model, it’s essential to be realistic about your current and future financial situation and not to over-extend yourself. Have a few alternative options in mind in case your first choice is not financially feasible.
What loan term should I have?
Once you have a clear understanding of your budget and have determined a realistic interest rate and loan amount, this question can be addressed. By putting all the financial pieces together, you can estimate how long it will take to pay off the loan. Keep in mind that while a longer loan term may reduce the repayment amount, it will also result in more interest accruing over time. This means that the longer the loan term, the more interest you will end up paying in the long run.
What will my repayments be?
Our repayment calculator can give you an estimate of your weekly or monthly finance repayments. You can also use our instant online quote system for a personalised quote based on the type of asset you want to finance and the current market rates available.*
Are there any ongoing fees?
In addition to the interest rate, car loans can come with extra costs such as establishment fees and ongoing monthly account charges. It’s important to keep in mind that the comparison rate includes these fees and charges, so always compare car loans using this rate to get an accurate picture of the total cost of the loan.
What’s a good interest rate in the current market?
The interest rate that you can obtain for your car loan is determined by several factors. Your credit score, financial standing, and the car you want to finance are some of the factors that can affect the interest rate offered by a lender. If you have a low credit score, you may be considered a higher risk borrower, which can result in higher interest rates.
Borrowers with a low risk profile usually have access to lower interest car loans, while those with bad credit are typically charged a higher interest rate. To determine the interest rate that you qualify for based on your individual profile, give our friendly Finance Consultants a call today on 1800 538 287.
Will I need a deposit?
Yes, no deposit car loans are available.
However, it is advisable to save up a deposit, particularly if you have poor credit history. A deposit can boost the chances of securing finance and lessen the required loan amount, ultimately decreasing the interest charged over the loan’s duration.
Should I obtain car finance through the dealership, a bank, or a finance broker?
Once you have taken the car for a test drive, you might be tempted into choosing the dealership’s financing option. However, it’s important to note that the first loan option offered to you may not necessarily be the best one. It is recommended that as with any large purchase decision, you shop around and explore various lenders and not just rely on the dealership or your usual bank.
However before submitting finance applications, it is important to keep in mind that too many loan applications can have an adverse effect on your credit history.
How do I shop around without negatively impacting my credit file?
You can explore different financing options without leaving enquiries on your credit report by using a broker such as Loans For U. Our Car Finance Consultants can get a comprehensive assessment of your credit profile and details of the vehicle you intend to purchase and determine which financier would likely offer the best finance option for your unique needs. This way, an enquiry is only left on your credit report if you choose to proceed with a finance application. Our experienced Finance Consultants can assist you with this process.
Our network includes numerous reputable bank and non-bank lenders in Australia, and we can assist you in obtaining the most appropriate finance for your situation. This removes the pressure and uncertainty of financing your next vehicle as well as saving you time and money.
To learn more about your financing options, contact our helpful Finance Consultants on 1800 538 287 for an obligation-free chat about your car finance needs, or simply get an instant online quote today.