7 Finance Tips for Buying a New Car
Have you been eyeing that shiny brand new car? Planning out all the steps to make that dream a reality? Purchasing a new car is an exciting experience, but we understand there is a lot to navigate along the way, especially when it comes to financing. In this blog post, we'll take you through seven valuable tips from our team of car finance experts for buying a new car and how to secure the best car finance in Australia.
Tip One: Set your budget
First things first, it is important to set a clear budget. We know it sounds like a no-brainer but the allure of that big dream car can be strong so it's crucial to establish a realistic and sustainable budget that includes not only the price of your new car but also ongoing expenses like insurance, registration, and maintenance. Knowing your financial limits from the start will help you narrow down your options and stay focused on the big picture.
You can use our car loan calculator here to help you better understand what your weekly, fortnightly or monthly repayments might look like.
Tip Two: Understand your options for car finance
Outside of buying a house, buying a car is one of the biggest purchases many of us will ever make so deciding what type of finance option to use when you are planning this exciting new purchase is really important.
In Australia, you have a range of car finance options available including:
- Secured loans
- Unsecured loans
- Dealership finance
- Salary sacrificing (a novated lease agreement)
- Redrawing on your home loan
- Using your savings
Using finance still remains the most common way for Australians to purchase a vehicle. Even if you are in the position to pay in cash, it’s always a good idea to understand your options.
If you’d like to understand more about the different options available to you, chat to our team of finance experts on 1300 722 210.
Tip Three: Check your credit score
Your credit score plays a significant role in securing car financing, especially the interest rate available to you. Before you start shopping for a new car, it's a good idea to check your credit score.
A higher credit score can help you qualify for lower interest rates, potentially saving you money over the life of the loan. If your credit score isn't where you'd like it to be, don't worry, there are many steps you can take to improve it and there are many lenders who work with lower credit scores if you aren’t able to wait for your score to improve.
There are many free credit score providers in Australia, you can find the options available by searching for 'Free Credit Score Australia' via your preferred search engine such as Google.
Note: checking your credit score doesn’t impact your score at all.
Tip Four: Compare lenders
We understand that it can be an overwhelming task to shop around for the best deal but settling for the first car loan deal that you stumble across in your search can put you at a disadvantage long-term (sometimes, even if it's from your most trusted banking institution).
An option to simplify the process is working with a car loan broker, like Positive Lending Solutions, to compare lenders including the ‘big 4’ to get the best deal without the stress of doing the research yourself. Working with a car loan broker means you get expert advice and a range of options to suit your needs with a quick obligation free quote without impacting your credit score with multiple applications.
Whether you decide to work with a broker or continue your research solo it is important to look around for the perfect deal and the best interest rate for you.
Tip Five: Keep the loan term as short as possible
When it comes to a car loan, opting for a shorter loan term can be a smart move.
It might seem attractive to spread your payments over a longer period to make each monthly installment more affordable, but keep in mind that this also means shelling out more money in interest for your car. The longer you take to repay a car loan, the more interest you end up paying.
So if you shorten your loan your monthly payments will be higher, but ultimately you’ll pay less in the long run. It's a win for your wallet and your peace of mind.
Tip Six: Put down a deposit if you can
To safeguard yourself from owing more than your car is worth, a savvy move can be to put a deposit on your car at the beginning of the loan. This can be even more beneficial when purchasing a new car, as their value tends to drop faster compared to used vehicles.
However, if making a deposit isn't within reach at the moment, don't worry; there are alternative options to help minimise the risk of ending up 'upside-down' on your car loan, where you owe more than the car's current market value. These options include choosing a shorter loan term with higher monthly payments, as mentioned above.
Tip Seven: Read the fine print
Once you have found the right lender, before signing on the dotted line, carefully read the terms and conditions of your loan. Pay close attention to interest rates, fees, and any additional costs. Be sure to understand the loan's repayment schedule and any penalties for early repayment.
If you are working with a car loan broker they can help you understand the fine print and provide guidance on the settlement process.
Knowing what you're getting into will prevent surprises down the road.
Final thoughts on finance for buying a new car
Securing the best finance for your new car is not just a matter of convenience; it can significantly impact your financial health for years after your purchase. These seven tips can help you take control of your car-buying process, and potentially save thousands of dollars over the life of your car loan.
Remember that while it can be easy to go with your trusted banking institution in the short-term, exploring different lenders and financing options might help you find something better suited to your needs.
One financing option to consider is Positive Lending Solution, our online application process provides all the information you need upfront, including interest rates, fees, repayment options and access to a team of car finance experts, giving you 100% transparency.