Whether pre-owned or new, you’re probably going to need finance when the need for a vehicle arises. These days, nobody really has $15,000 or even $5,000 readily at their disposal which is probably why loans are quite popular in Australia.
The most popular way to go about it is to borrow money in the form of a personal loan or car loan. Thankfully, there are quite a few types of car loans for you to choose from. So explore your financing options and while we’re in the topic of research, take note of these finance costs:
Depending on the lender you work with, these seemingly tiny fees may actually cost you a few hundred more than they should. Make sure to check out multiple lenders because these fees vary.
More common in car loans, down payments can cost you anywhere between 10% to 50% of the total cost. You can always put more if you have the extra to bring down your weekly, fortnightly or monthly repayments.
Take note of your credit standing. The better it is, the smaller down payment will be required of you and vice versa to be considered as a health risk by the lender.
This is one of the costs that you must absolutely pay attention to, and perhaps one of the most visible. Just like down payments, the better your credit standing the lower your interest rates.
These rates typically range anywhere between 5% and 15%. However, some dealers and lenders will give better interest rates than others so be sure to shop around.
It is imperative that you read through the Terms and Conditions or Finance Agreement. Do the math, check for all possible costs, or get someone knowledgeable to help you understand the contract better before signing.
There is a myriad of charges that a lender could bury under flowery words and a long contract so be vigilant. If possible, look for a lender that provides car finance with no hidden fees.
One of the most common hidden fees in car financing is the early exit fee, also known as the pre-termination fee.
Keep a lookout for this in your contract because this will determine whether or not you will still pay the same amount discussed for the loan term should you decide to pay it all in one go.
The reason for this fee is to compensate all of the administrative costs and anticipated interest that the lender doesn’t earn for the duration of your term.
Remember that when it comes to car finance in Australia (or anywhere else for that matter), the secret is in doing your due diligence. Create a spreadsheet if you must to compare the pros and cons of each lender to make sure that you get the best deal possible. Good luck!