New car smell. We all love it. And for good reason. A new car is exciting. Its shiny, it goes vroom and it smells nice. Australians love their cars and this time of year is one of the busiest car buying times as many take advantage of end of financial year sales and model run outs.
What is surprising though is how many people start shopping around for a new car without having their car finance sorted.
You’ve done a bit of online research, you’ve narrowed down your selection and you head out to the dealership to have a ‘look’….next thing you know, the car salesman has signed you up for a five or seven year loan (with a few additional extras thrown in) with the dealers finance provider.
How do you know whether you get the best rate or deal on that car loan?
There are a few things that you need to keep in mind when it comes to your car and car loan. It’s worth shopping around, not just for the right deal on the car, but also for the right loan.
Dealer finance – it’s not always the best deal
Before you think about taking up an offer of finance from a dealer, make sure you ask lots of questions. A very low rate can come with serious strings attached. Typically you have less room to negotiate which could mean you are paying thousands of dollars extra for your car. Dealer finance can be very restrictive and not as flexible as other car finance options out there.
Just as importantly, dealer finance can come with a whole host of additional costs which can bump up the cost of car finance. Be sure to ask if there is residual value or balloon payment, which is a lump sum due at the end of the contract term, which can be expressed in dollars or a percentage of the car’s initial sale price. Make sure you clearly read the paperwork and fine print before you buy your car, and don’t sign the paperwork on the same day.
0% p.a. interest car finance
Another common car loan offer from car dealers is the offer of 0% p.a. interest car loan from your dealer. While there’s no denying that sounds like a great deal, there are some things you need to know before signing up.
While the loan is being advertised as 0% p.a. interest car finance deal, the price of the car you’re looking at may have been raised to compensate for the low rate, and further negotiating the car price with a dealer may be out of the question. These offers are usually only valid for certain car models, so if you have your heart set on a particular model, you may have to compromise to take up the 0% interest offer.
It’s also important to look out for additional clauses in the contract, such as having to have the car serviced at the dealer, which may mean paying higher service prices than you would at your local mechanic. You should also check any warranties and insurances included in the contract, and make sure you are only paying for what you need.
Get pre-approval for your car loan
In most cases, the safest way to finance a car is to have a car loan pre-approval before searching for the car. It’s not the most exciting part of buying a new car, but it can save you thousands in the long run.
Having your pre-approved loan and budget in mind before starting your car search will allow you to focus on finding the right car and the best deal, and room to negotiate with the seller knowing exactly how much you can spend.
Do your homework
The key when finding the right car finance for your new car is homework. Make sure you read the fine print and shop around for the deal that’s right for you. And definitely don’t choose on rate alone – often a low rate can hide other surprises, so make sure you know what you’re paying for in the long run.
Let us help find you the best car loan
We have over 20 car loan lenders, all of which are competing for your car loan and will offer some great rates and features. We can find out what you need from your car loan, then search through hundreds of car loans to find you the right one, at a great rate.