What to consider when researching for your next car loan
We don’t have to tell you that your car is your ticket to everything the Hunter Valley has to offer. Paddling in Port Stephens, a gourmet lunch in Gosford, hitting up the Central Coast for Coffee – it’s all courtesy of our vehicles. Access to the region will improve again with the eventual completion of the Hunter Expressway.
With international travel restrictions in place until at least 2022, many people are turning to better exploring their own back yard; and what better way to do it than in a new or second-hand vehicle? So, let’s look at how we can get behind the wheel of a new car without breaking the bank; including tips on finding a good deal, completing a car loan application, and how to get leverage during a negotiation.
Set a clear budget
Before buying a car, new or used, you need to work out how much you can afford to spend. This means how much you can afford each month in repayments for a car loan. You can work this out using a car loan calculator. You need to know how much you need to borrow, the interest rate of the loan, and how long the loan lasts (the term). The interest rate might not tell you the full picture – more on that later. We’re not all racing in the next Newcastle 500, so it pays to be realistic about what you really require.
Once you have a firm figure, you can look for cars in your price range. Car expert and Savvy Managing Director Bill Tsouvalas says that if you can go for a new over a used car, it’s usually worth the extra expense. “Banks and lenders don’t like approving finance for clunkers. Older cars are unreliable just because of wear and tear. New cars have a warranty, better safety features, higher fuel efficiency, and aren’t going to cause many headaches for you or your lender. They might be more expensive but you will be ‘rewarded’ with a lower interest rate compared with a much older model. ”
Applying for a car loan
Before you complete a car loan application, you should check your credit history (or credit score) to make sure it’s as healthy as it can be. Sometimes your history can be impaired for various reasons such as a housemate forgetting to pay a bill on time; and these black marks can follow you around for up to seven years.
Before settling on a loan, make sure you know all the fees and charges upfront. Loans that show a comparison rate (look for these exact words) have almost all fees and charges included in the interest rate per annum (per year.) You also need to fulfill the basic eligibility criteria such as being over 18 and an Australian resident.
You’ll also need to show proof of income or bank statements. Some lenders may need to verify these manually – though some brokers use automatic systems that speed this process up. You might be tempted to use dealer finance, but Bill Tsouvalas warns against it: “Going through a broker with many lenders on their panel will usually find you a better deal than the dealer. If they offer zero or one percent loans – well, there’s almost always a catch.”
Pre-approval and negotiation
Instead of waiting until after you’ve bought a car to get finance, a pre-approval means you get all the paperwork sorted before you buy – then “pull the trigger” when you find a suitable car (within a set period, usually a month.) Having pre-approval gives you an edge in negotiation, Tsouvalas says. “It gives you a ‘price ceiling’ that you can’t go over – if a dealer wants to sell you a car, they have to match your ceiling, or you walk away. Dealers want to sell; you can use that to your advantage. By having pre-approval you’re a red-hot prospect – they’ll bend over backwards to accommodate you in most circumstances.”
It can also help in negotiating with private sellers across the Huter region – it signals you have the funds ready to go if you decide to buy. It usually gives all parties better peace of mind while tipping the power balance in your favour.
Whether you’re heading inland in search of a Semillon or Shiraz, hitting the coast or somewhere in-between, the trip will only taste all the sweeter doing so in a new set of wheels that hasn't broken the bank.