7 tips to getting the best car loan

Second to a house, a car is one of the single biggest purchases you are likely to make and whether it’s a brand new or second-hand car, many of us will consider taking out a loan to finance that purchase.

It can be a daunting prospect and tying yourself to years of repayments shouldn’t be a decision you come to lightly.

So, before you even meet with a lender or bank it’s best to do a little research.

Buying a car is a marathon not a sprint and being well informed could save you enormously in the long run.

Here’s what you need to know about finding the best loan.

1. STICK TO THE BUDGET

Probably one of the most important things to do when getting a car loan, or any loan, is to find out what you can afford and stick to it.

Before you even begin researching what car you want, sit down, crunch the numbers for incoming versus outgoing, and consider how much you can afford to repay over what period.

Remember to consider all costs related to a car such as registration, fuel, insurance, maintenance, repairs and tolls.

2. CLEAN YOUR STATE

The less debt you have, the more attractive you look to a lender.

Before you go for a car loan, try to clear any outstanding debt you have and establish a savings plan.

This will show you as a reliable good option to lenders.

3. SHOP AROUND

Don’t automatically go for the most convenient option.

Do your homework and research how dealer finance and independent lenders compare and consider all your options carefully.

A low-interest rate may mean you have little to no room for negotiation on the actual car, so you need to consider what’s important to you.

4. READ THE T&Cs

Meticulously read the terms and conditions to the loan.

A loan that penalises you for early repayments or additional payments isn’t ideal, especially if you have the ability to pay the loan off quicker.

Confirm this before signing and remember that the longer you have a loan, the more interest you pay.

5. CONSIDER CREDIT CARDS
Depending on how much you’re looking to spend, a credit card with an interest-free period may actually be more favourable to you than a personal loan.

Only consider this option if you can pay off the debt in the interest-free period otherwise the fees will be a heavy hitter.

6. DON'T DESTROY YOUR CREDIT RATING

The idea of putting in multiple applications for a car loan may seem like a good idea but doing so can have a major negative impact on your credit rating, particularly if you’re knocked back.

Instead, apply for one finance option and stick to it.

7. FEES

It’s quite normal to be charged an application fee (although there’s no harm in asking to waive it) but ongoing service fees can and should be avoided.

Look out for this in the T&Cs of a loan and, if you can, opt for a lender that doesn’t have ongoing fees.

Purchasing a car is an exciting yet major decision. If done poorly, your experience can be really tainted, not to mention the bad taste you’ll carry around for the duration of the loan.

Consider what will work best for you and be thorough in your research. Your future self will thank you!

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