How to Finance a Car? Learn How to Do It

For many people, buying a car can represent their independence and the guarantee of easier mobility around the city or even the country. For some, it can actually represent a real dream, something they wish to conquer, but that sometimes can be a little difficult to achieve, considering the high costs of owning a car.

However, with good and realistic financial planning, intelligent research, and a lot of patience, making your wishes come true can happen faster than you imagine.

In this article, we will help you understand some of the most important tips to make a good decision if you want to finance a car and identify which loan option best applies to your profile.

Advice for Beginners and Things You Should Pay Attention To

To begin our journey through this world, let’s start by thinking about some of the crucial points you should pay attention to, as listed by the well-known platform MoneySmart, provided by the Australian Government. By following these steps, you may save some money while buying your car.

• Don’t be afraid to research. Take a good look at the options available, as making a well-informed choice can help you save money.
• You should always compare the loans available before visiting any car dealer. That way, you can feel more prepared to negotiate, since you will already know how much you can spend, the best interest rates you can get, and how much your repayments will be.
• Don’t let the dealers sell you things you don’t want. Know exactly what your possibilities are and don’t allow them to make you feel pressured.
• Learn the differences between fixed and variable interest rates. The first one, as the name suggests, is fixed and will not change during the set period. With the second one, however, your repayments can change if the interest rates change. Normally, car dealers tend to use the first option.
• If you decide on the so-called “balloon payment,” which can be one of the loan options available, keep in mind that only part of the loan will be paid as regular repayments. The other part will be a lump sum plus interest, which will make the amount higher.

Some of the most important factors you should definitely pay attention to are the interest rates, application fees, loan conditions and terms, and any extra repayments or fees. These can be a good tiebreaker to help you make a decision if you are feeling undecided about different options.

How to Finance a Car

Now that you already know what to pay attention to while choosing your vehicle, there are certainly other factors that can help you make an intelligent decision, as financing a car can sometimes be a little overwhelming, especially if this is your first time.

One thing you can easily do before talking to a dealership is to review your credit score. Have you paid everything correctly and on time? A good score can be a game changer for you, as it can impact the type of loan you may receive. The better your credit score, the higher your chances are of being eligible for upper-tier loans.

Another important thing is to compare dealership financing vs. getting a bank loan, as they may differ. Sometimes, the first option can seem more convenient, but it can also have higher interest rates. On the other hand, a bank may offer better rates, but at the same time, the approval process can be more bureaucratic.

Either way, before heading straight to a dealership, you can always talk to your bank and see what offers they may have. Sometimes, they offer special deals for clients, which could be beneficial for you. By knowing this beforehand, when you go to the dealer, you can make better comparisons.

Sometimes, we get overexcited with an idea and don’t really think in a smart way. It’s ok! We’ve all been there! But one tip that can save you in the future is to keep the loan term as short as you can afford. Normally, the longer it takes to repay the loan, the more interest you will have to pay, and you certainly don’t want that, right?

Environmentally Friendly

People are different, for sure, and some may have a dream car they’ve been looking for for ages, and that’s ok. But another option that can be a good choice for those who don’t have a specific car in mind is going green. Have you ever considered that?

Some of the benefits of choosing an electric, hybrid, or fuel-efficient car include lower running costs and typically lower maintenance costs as well. Another thing you can check is government incentives that could help reduce the costs of acquiring your vehicle.

However, as with everything in life, there are also some downsides you should be aware of, such as battery degradation, charging logistics (which require some planning), and higher upfront costs.

Other Options

Despite all you have learned so far, there are other things you can do while researching the best way to finance your car. For example, you can also consider looking at used cars as a possible option. But, keep in mind that they may seem cheaper at first glance, but you could end up spending more on maintenance costs than you think, as they are usually older.

Another option some Australians consider is a novated lease. Often regarded as one of the most tax-effective ways to “buy” a car, it can be a viable option for some people. However, it may not be the best investment choice, as you don’t truly own the vehicle during the lease period. Additionally, the process involves not just you and the finance institution, but also your employer, who is responsible for making the lease payments through your pre-tax income.

Conclusion

There are so many elements to consider and pay attention to before deciding how to finance your car. But keep going!

It is better to know all these things before talking to a bank or a dealer, so you can ensure that all your questions are answered. By keeping all this information in mind, you will surely be able to negotiate properly, as you will know exactly what to look for.

Our final tip for you is to always be patient. You see, buying a car is not the same as buying a piece of clothing. It is a decision you must make only when you feel confident enough to take this step and know you won’t regret it, so stay calm and make a smart move!

Some websites can offer you assistance while making this decision. After talking to your bank, you can also take a look at some of them, such as CarLoans, but make sure you only make deals with institutions you trust. Good luck on your journey!