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What to look for to get the best car finance deal
Written by
Shaun McGowanThe best car loans for an individual will have a low fixed rate and no fees.
This means the interest rate applied to your loan will remain exactly the same for the duration of the loan term. As a general rule, the newer the car you buy, the lower the interest you’ll pay. For example, new cars often get a better rate than a 8 year old car.
Ok, so what’s the best car loan for you?
Before we look at things like loan features or terms, you’ll need to decide what type of car loan is best for your situation.
Here are all the ways you can finance a vehicle:
- Secured Car Loans- The most popular and common car loan in Australia. Borrow up to the value of the car, which is then used as security on the loan. Good rates and plenty of lenders to choose from.
- Bad Credit Car Loan - A secured car loan for people who have an impaired credit file from defaults (paid or unpaid).
- Low-Doc Car Loan - A secured car loan if you’re self-employed, can’t provide normal application documents or have inconsistent income. May require a personal guarantee.
- Novated Lease - A type of car loan you can get as part of your salary. Your employer needs to agree, but repayments and other costs are paid using your pre-tax salary.
- Chattel Mortgage - A secured car loan if you own or run your own business. You have to use the car for your business at least 50% of the time, but you can get some great tax benefits.
- Operating Lease - A rental agreement where you’ll be given the option of buying the vehicle from the lender at the end of the term and you get the benefits of ownership.
- Finance Lease - A rental agreement combining the two types above. You’ll be given the option to either trade in the vehicle or purchase it at the end of the term, but the lender gets the benefits of ownership until then.
What’s the best car loan for personal use?
The best car loan for personal use will be a fixed-term, fixed-rate car loan.
This is similar to a secured personal loan, and repayments can often be negotiated to weekly, fortnightly or monthly instalments to suit your income frequency.
To qualify for the best car loans, you’ll need to:
- Have a high credit score
- Have been in regular, stable employment for two years
- Have the ability to meet the repayments
Find the best deal on car loans
FIND YOUR CAR LOANWhat’s the best car loan for a business?
If you’re buying a car for your business, you’ll usually be able to find a loan that gives your business tax benefits or lets you reclaim the GST you pay on the car.
The most common type of business car loan is a Chattel Mortgage.
This lets your business finance a vehicle and claim back the initial purchase-price GST on your next business activity statement (BAS).
No matter what loan you choose, you’ll need to use the vehicle for at least 51% for your business.
What are the best car loan features to look for?
The features of your loan are the extra conditions or restrictions set by the lender.
These are separate from the interest rate or fees you’ll get but can be just as important.
Loan Term
A longer loan term means lower repayments, but higher total interest and fee costs.
A shorter loan is the opposite.
Try to find a loan term that balances repayment affordability with interest and fee savings.
Loan Amount
Most car loan lenders have loan minimums of $2,000 and maximums from $50,000 to $75,000.
Loan Flexibility
Different loan features may offer flexibility, or make your loan easier to repay.
For example, some loans allow you to choose whether to repay your loan weekly, fortnightly or monthly to suit your pay cycle.
Others might offer same-day loan approval and payout of funds within 24 hours
Customer service
Throughout your loan term, there’s a good chance you’ll need to get in touch with your lender.
Look at online reviews and find out as much about them as you can to ensure they have good customer service.
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About the Author
Shaun
McGowan
Shaun McGowan
Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.
*Information about comparison rates Comparison rates are designed to allow borrowers to understand the true cost of a loan by taking into account fees and charges, the loan amount and the term of the loan. The comparison rate is based on an unsecured fixed rate personal loan of $30,000 over 5 years. WARNING: Comparison rates are true only for the examples provided and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate.
