Buying a car isn’t just about searching for the right vehicle. You also need to consider how you’re going to pay for it. Chances are, this will mean applying for finance as cars are expensive and not everyone has the cash on hand to pay for them outright.

So what’s the best way to finance a car in Australia?

Well, to answer that question, you first need to consider what makes a good car loan.

 

What makes a good car loan?

It’s important to choose the right car loan for your individual circumstances, as your choice can impact your finances for many years to come. So how do you find the best car loan for you?

Here are 10 factors you should pay attention to when you are comparing car loan deals:

●      Interest rate – how much you are being charged for borrowing the money (the lower this is, the less expensive the car loan will be)

●      Interest rate type – variable or fixed

●      Security – most car loans are either secured (i.e. the vehicle is used as collateral for the loan) or unsecured (no collateral)

●      Loan term – how long you have to pay off the car loan

●      Repayment frequency –  weekly, fortnightly or monthly

●      Application fees – the fee when you apply for a car loan

●      Ongoing fees – additional fees that occur throughout the life of the car loan

●      Balloon payment (also called a residual payment) – a lump sum payment you make at the end of the car loan

●      Features – such as a redraw facility or the ability to make extra repayments on the car loan without paying a fee

●      Loan conditions – whether there are any conditions attached to the car loan, such as an age limit on the vehicle being purchased

Everyone is different, with different financial circumstances and goals. So the right car loan for you might be different to the right car loan for your sibling, friend or colleague. It’s all about finding a finance arrangement – based on the criteria above – that best matches your unique individual circumstances.

 

What’s the best way to finance a car?

Now we know some of the factors that make up a car loan. But where’s the best place to get a car loan?

Well, when it comes to financing your car in Australia, you generally have three options:

1. Get a car loan at the dealership (known as dealer finance)

2. Apply directly with a lender

3. Use an expert car loan broker like Naked Loans

Let’s look at them one by one.

 

Arranging car finance at the dealership

Getting a car loan at the dealership can seem like a great option, particularly as it's so convenient. What’s more, the salesperson might offer you a discount on the overall price of the car or 0% financing if you let them arrange the finance.

But, as the saying goes, anything that sounds too good to be true, almost certainly is. While the dealership’s terms might seem attractive, there’s likely more to the deal than first meets the eye.

Take that eyecatching ‘0% interest’ deal, as an example. In many cases, the price of the car  will be bumped up to compensate for the low rate. Alternatively, if you negotiate a really great discount on the car itself, the dealer might jack up the interest rate on the car loan or add fees that make it more expensive in the long run. 

Another problem with dealer finance is that the dealer usually has just one or a handful of lender partners, which means that rather than scouring the market and providing you with the best car loan for your situation, the dealer offers you the loan that is most convenient for them.

As such, it’s critical you always crunch the numbers before signing on the dotted line … which can be easier said than done when the salesperson is applying pressure. Remember, when you walk into a car dealership without a pre-approved car loan, the cards will be in their favour.

 

Applying directly with a lender

You can also apply for a car loan directly with a lender. Going direct-to-lender can help you sidestep some of the pitfalls associated with dealership finance outlined above. However, there are other traps you need to avoid.

The first of these is figuring out which lender and which car loan product to choose. There are dozens of car finance lenders and hundreds of different car loan products in Australia. You will need to evaluate all these options to help figure out which car loan best suits your individual financial situation.

To further complicate matters, each lender has its own specific requirements for approval. So if you apply with the wrong lender, there’s a chance your car loan application will get rejected, potentially damaging your credit score in the process.

 

Using a car loan broker

A good car loan broker has relationships with many lenders. So they can do all the hard work of comparing and evaluating the deals on your behalf, before providing expert advice on which car loans best suit your personal circumstances.

They can then guide you through the car loan process and submit the application on your behalf. This doesn’t just save you time, stress and money. It also protects your credit score as they know which car loans you will qualify for.

So while using a car loan broker makes sense for borrowers from all backgrounds, it can be particularly relevant if you have a poor credit history or have previously been rejected for finance.

 

Can you refinance a car loan?

There are many reasons why you might want a car refinance. For example, you might be looking to save money by switching to better car loan terms or, alternatively, want to reduce the size of your regular repayments to make them more affordable.

A car refinance could also be a good idea if your credit score has improved since you first took out your car loan. As a result, you might now qualify for a car loan with a lower interest rate, which could save you thousands of dollars over the life of the loan.

Regardless of your reasons, the good news is that you can refinance your car loan. However, please note that refinancing comes with costs and is not suitable for every borrower. So it’s vital you crunch the numbers to make sure a car refinance is the best move for your particular situation. An expert car loan broker like Naked Loans can help you explore all your options.

 

Get a great deal from an expert broker 

For most borrowers, then, the best way to finance a car in Australia is to use an experienced broker, like Naked Loans, which deals with lenders day in, day out.

That will improve your chances of getting the best car loan for your situation, in terms of the interest rate you get charged, the features of the loan, the chances of approval and the speed of approval. And it will save you a lot of time and stress as well.

An experienced car loan broker can also help you with car refinancing.

Looking for the best way to finance a car in Australia? Naked Loans can help you secure a great deal. Apply online now or contact us by calling 1800 438 625, emailing info@nakedloans.com.au or filling in this online form.