Car Loan Comparisons – Top 10 Tips…..
There’s plenty to think about when choosing a car loan. If you really want to get the best deal for you it’s not quite as simple as just checking out a table of interest rates on a comparison website. By doing that you’re really just scratching the surface.
Here’s my checklist of 10 Things to Consider When Comparing Car Loans:
- Car Usage
Are you going to use the vehicle for personal use, business use or a combination of both? If you use your car to drive to and from work then this is classed as personal use, if you use your car to drive to meetings with clients, for example, then this would be classed as business use.
The reason you need to consider what the vehicle will be used for is because this will have an effect on what loan and lease options are available to you. For example, if you’re going to use your car for personal use then don’t waste your time looking at finance deals that are only available to business customers. If it’s going to be used for business use then you need to consider what’s going to be the most tax efficient way to do it for you.
- Types of Loan
When it comes to car finance there’s plenty of options out there, not all of which will suit you. The main options are; secured loan, unsecured loan, chattel mortgage, hire purchase, novated lease, lease and operating lease. It pays to spend a little bit of time getting to understand how they differ and what financing method suits you best.
Whether you want to go with a name that you know and trust or if you’re just looking for the cheapest deal there’s plenty of banks and finance companies to choose from. Some specialise in car loans, some offer car loans as a sideline to their main business. Some prefer to lend to ‘blue chip’ customers, some lend mainly to people who’ve had past credit problems. The most important thing is that you get access to a broad range of lenders and find the one that’s right for you.
- Interest Rates
Rates are the main yardstick that people use when comparing car loans. I prefer to think of them as being like a headline in a newspaper. They grab your attention but don’t necessarily tell you all of the story. The rate is going to play a big part in determining the cost of your loan so it’s a good place to start your car loan comparison but be aware that it’s not the only element to consider.
Fees are another element that will directly impact on your cost of borrowing. They’re not displayed as prominently as interest rates but you need to find out what fees apply and how much they are before proceeding with a loan. Beware of being lured in by attractive headline rates only to find out that the deal involves high fees.
You might get your head turned by an attractive looking deal but make sure that you qualify for it before dismissing other options. For example, your loan may be below the amount required to qualify for the ‘special rate’, the car you want to buy may be too old to qualify, your credit history may not meet the necessary criteria, you may not have enough deposit etc. …….. The list goes on. Before you know it you’re being offered an alternative deal that’s not quite as good as what you were expecting.
Most car loans involve the lender using the vehicle that you buy as security. In other words, the bank or finance company have some rights over the car which could allow them to repossess it if you were to break your agreement and miss your loan repayments.
When it comes to selling or trading in your car a secured type loan needs to be paid off in full before the sale can be completed. If you want an unsecured loan you usually have to pay a higher rate for the privilege.
- Early Termination
If you think that you may want to occasionally pay extra off your loan or if you’re planning to pay the loan off early with a lump sum, make sure to check beforehand that your loan allows you to do this. If your loan does provide this flexibility check out if there are there any costs associated with it.
- Loan Inclusions
Make sure to check that the loan will cover everything that you want it to. Most Banks and Finance Companies will limit how much they lend against the value of the car. So if you’re planning on adding lots of extras and accessories to the car, for example, or including the cost of an extended warranty check out whether the lender will be prepared to include this in the loan for you. Otherwise you could be left with an unexpected bill to pay!
If you’re in a hurry to get behind the wheel of your new car then find out in advance how long the loan application and settlement process will take. Turnaround times can vary significantly between different Banks and Finance Companies. Some specialist car loan providers can have you driving away in less than 24 hours whilst others can take days or even over a week to sort everything out.
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