Most of us are in the market for a new car at some point or another and usually multiple times throughout out our life.
While you may have worked out the make, model and colour of the car you want, have you considered the best way to finance your car? There are a number of small steps you can take to ensure you're getting the most out of your money before you start signing the paperwork.
Know your credit score
If you don't have the money saved to buy a new car, chances are you will need a loan. But, before you start to apply you should first take a look at your credit score. Not only is your credit score a key factor in whether a lender will borrow to you, but it can also impact the amount of interest you'll pay on your car loan. To find out more, read our article What is a credit score and does everyone have one?
Consider a used car
There's no denying the benefits of a brand new car. Peace of mind knowing it's fresh from the factory, new car warranties, the latest tech updates and of course that new car smell. However if you're more in the market for an upgrade on what you currently own, then a used car is always worth considering. With so many reliable brands and models available, it's easy to find a used car that is still in great condition, has many years ahead of it and still gives you that 'new car' feeling. Not only will you be paying far less for a used car that is only a few years old, but you'll have less vehicle depreciation and will save money in the long run through cheaper insurance and registration costs.
Always put down a deposit
While it may be tempting to get your hands on a new car as soon as possible, if you don't have a deposit saved you could end up owing more than what the car is worth.
If you're able to put down a sizable deposit of at least 20% your monthly instalments will be more manageable and your repayment term could be reduced.
Keep the loan period short
Speaking of repayment terms, it's generally best to ensure you repay the loan as soon as possible. Of course opting for a longer term means lower monthly repayments, however you will end up paying more interest in the long run. Keeping your repayment period short will not only reduce the total amount of interest on your loan, but if you intend on reselling your car within a few years it will have a higher resale value if there is no loan attached. On top of this, a shorter term means paying your loan off quicker and being debt free is a great feeling!
Work out your financing
Unless you've recently come into a windfall, chances are your new car will need financing. Most dealers offer financing options in which they deal directly with their preferred lender to arrange the loan for you. While this is a convenient option, it's not always the best one to take as the dealer may charge additional fees. Before stepping into the dealership, find out from your lender how much you can borrow and what your monthly repayments would look like. Chances are you will get a better deal on interest rates and will know exactly how much you can comfortably afford. You can then go into the dealership knowing you're making a planned decision rather than an emotional whim.
Shop around for those 'extras'
Whether you're buying a new or used car from a dealer, there is always the offer to pay for extra features such as extended warranties, tire protection, paint protection and tinting. Again, while convenient to know this can all be taken care of for you, it can be hard to know whether you're being offered a fair price, particularly if you hadn't factored these into your initial budget. Take the time to research tint or paint protection costs beforehand and organise to have these applied elsewhere after the purchase. As for the extended warranty, this can be bought later down the track just as your factory warranty is about to expire. You'll save money not only from comparing prices for each of these additional extras, but by paying for them separately, you won't be rolling them into your car loan and paying the additional interest on top.
If you're in the market for a new or used car, find out how much you can borrow with our award winning car loan.
Auswide Bank Ltd Australian Credit Licence 239686 is the credit issuer. This is not an offer to lend – approval is subject to credit assessment criteria. Terms, conditions, fees and charges apply – full details on application. This information provides general advice only. We do not provide advice about this product based on any consideration of your personal objectives, needs or circumstances.
Published: Wednesday, 09 Mar 2022