New or second-hand – whatever type of vehicle you decide to choose, there are a variety of lenders and financial institutions that can help you to finance it and we’re going to discuss these options and more.
This article will explain what vehicle loans are, how they work and why they are a good choice. You will have the set of wheels you need in no time!
Choosing the right lender to help finance your new adventure, can be a daunting task. There are such a wide variety of lenders available and different car loan options, how do you know where to start your search?
The current fast-paced lifestyle makes relying on others for transportation very difficult and often impossible. Whether it’s getting to and from work or fetching the kids from school, a vehicle has become a basic necessity that the average Aussie family cannot do without.
Before getting vehicle finance
A vehicle loan will enable you to finance the car that you have always wanted or that will make your life more convenient. Before you even approach a lender to seek finance it is important to know what you are looking for and do your homework carefully.
While the latest sports car might be glamorous and attractive, it is not necessarily the most practical purchase if you have a large family. Likewise, if you have long distances to travel to work then a vehicle with low fuel consumption would be the more affordable option.
It is important to assess your individual or family needs to find the most practical and affordable fit before you visit the dealership. The reason for this is that car salesmen are trained to push for better deals but if you arrive already knowing what you want, you will not need to worry about being coerced into something you did not want.
You should also consider whether or not you want to purchase a new vehicle. A used vehicle may save your thousands but comes with it's own range of limitations including higher maintenance and insurance costs.
Determine your budget and stick to it
Similarly, you need to determine what your price range is. Most lenders require quite a hefty deposit, usually ten percent of the total price when you enter the agreement.
So, when determining your budget, you need to take both the deposit and monthly repayments into consideration. Once you have decided what type of vehicle you want and how much you can spend, you can begin your search for the right dealership.
How to apply for vehicle finance
Applying for a vehicle loan is similar to applying for any type of personal loan. Most lenders will even allow you to complete the application online making the entire process quite convenient and fast.
However, if you prefer a more human touch, you can contact them or meet with a consultant in-branch. Here the consultant will be able to advise you which option would be the best to choose.
If you are not too keen on choosing your lender, you can even finance your vehicle through a car loan broker. The broker will assess your budget and financial situation and direct you to the most suitable lender. Vehicle loans are traditionally secured loans. This means that the vehicle is used as security against the loan amount that you are borrowing.
Effectively, the lender will pay for the vehicle and you will repay the lender for the amount borrowed as well as interest on the amount. Should you be unable to repay the loan, the lender will sell the vehicle and deduct the balance due from the sale amount.
Each lender has their policy on financing either secondhand or new vehicles. Once you have found the perfect deal, the lender will collaborate with the lender or private seller and settle matters for you.
Pros & cons of vehicle finance
As with any loan, there are always a series of pros and cons. There are a few things that you should keep in mind when looking to obtain vehicle finance.
Interest on car loans in Australia
When compared to a basic personal loan, vehicle loans often have a lower interest rate. However, a lower rate does not mean that it is necessarily better.
When taking out a vehicle loan, you are required to make a down payment or deposit. After this has been deducted, the balance will be lower than that of the personal loan making it appear cheaper.
This does not mean that you should not use vehicle loans, but rather ensure that you find the lender that offers the best deal.
Car loans available to those with a low or bad credit score
Even with a less-than-perfect credit record, vehicle finance is possible because the vehicle is used as a form of security. This makes vehicle finance relatively easy to obtain and affords the borrower with the opportunity of improving their credit record by the end of the borrowing period.
You will be offered a higher interest rate and will therefore pay more overall for your vehicle loan than someone with good credit.
Deposits for a car loan in Australia
As stated above, the borrower will need to save up money to make a down payment on the loan. This means that the borrower will first need to save up money before applying for a loan.
This savings goal can be achieved a lot quicker if you create and stick to a budget as well as employ some important financial principles. The borrower will also only own the vehicle once the final repayment has been made – until then the vehicle belongs to the lender!
A vehicle is a necessary asset and will make your life a lot simpler. Financing is through the correct lender will also drastically improve your financial wellbeing. Be sure to do your research to get the best deal that money can buy.
Your adventure awaits!