Shopping for a new car can be a timely exercise. There’s price, new/used, design, colour, features, and technical aspects to consider. Like shopping for a new car, looking for a new car loan should be treated with the same time and effort.
Doing research from the outset could save you thousands in interest and potentially have your new car paid off quicker. Being prepared with an idea of what is on offer could also put you in a stronger position to negotiate when you do arrive at the car dealership.
With tax time approaching, we know that a new car might be on the cards for some of you. Hence, why we thought this would be the perfect time to put a few tips together for when you take the step to shop for a car loan.
Fixed or variable?
Well firstly, what is the difference between the two you ask? A fixed rate means your required repayments are fixed and won’t change. This might be a better option for those of you who like consistency and a ‘set and forget’ approach when it comes to repayments.
A variable rate on the other hand is where your interest rate could fluctuate through the term of your loan. If interest rates rise, your repayments will be higher as a result. However, on the flip side, your repayments could go down when interest rates fall.
This is a particularly important factor when assessing a new car loan as it will determine the cost of your repayments.
Early exit fees and other hidden fees
Early exit fees are fees that a financial institution charges if you pay out your loan requirements before the agreed loan term. These can range from hundreds to thousands of dollars. Some can also be based on a percentage of the loan amount. Generally fixed loans will have early exit fees.
In addition to this, you may want to assess which car loans have monthly maintenance, document and other hidden fees. These can be carefully hidden in the fine print and add a considerable amount to your overall loan amount.
If you are planning on paying out your car loan as quickly as possible, it will pay to spend some time looking for car loans that do not have any early exit and monthly maintenance fees or penalties for additional repayments. Our competitive New Car Loan has no early exit fees and an affordable monthly maintenance fee of $5 a month*.
Secured or unsecured?
Most car loans for new vehicles are secured. The security on the loan is typically the new car you are purchasing. This means that if the loan isn’t paid back in time, the lender can repossess your car and sell it in order to recoup the outstanding balance of the loan.
If you do not want to use your car as the security, you can look into an unsecured loan. However, you will be charged at a higher interest rate and may not be able to borrow as much.
If you’re looking to spend a little more on your new car this time around, then you may need to consider a secured car loan over an unsecured, depending on your circumstances.
Overall, when searching for a car loan, it is important to consider if you will need a fixed or variable rate, if there are any hidden fees and if a secured or unsecured loan is the best option for you. When assessing your car loan options, don’t forget to put our award-winning New Car Loan in to the mix.