Getting a car loan

Looking to buy a car? Getting a personal loan from a financial provider (like a bank) or finance from a car dealer could get you behind the wheel sooner rather than later.

Get to know your finance options before you walk into a car yard, to help put you in a better position in the long run.

First thing's first – know your budget

Are you looking for a car to last you a long time, or a smaller, run around car you’ll only keep for a few years? This will probably influence how much you’re willing to spend.

You also need to know how much you can afford to spend. Your savings, debt and income will determine how much you could borrow and what you can afford in repayments.

Getting a loan from a bank

With a personal loan, you apply to borrow funds before you buy the car and then pay off it off in instalments once the loan is approved and funded.

Personal loans come with a bunch of benefits that could make them a better option for you.

Negotiate a better price

Having finance sorted before you buy a car is like having an ace up your sleeve. Knowing you can pay the full amount then and there means you’ll be more confident to barter on price and less tempted to spend more than you can afford.

When getting finance from a dealer, on the other hand, the car price could be stuck once they offer you a low rate – and they could be less likely to give you a better price.

Know exactly what your repayments will be

You can have greater peace of mind with a fixed interest rate on your personal loan. A fixed rate stays the same for the life of the loan, so your repayments will too.

Make extra repayments to pay off the loan faster

If you come into spare cash to make extra repayments, you could own your car sooner.

Keep in mind that you might need to pay an early repayment fee if you pay off the loan before the end of your loan term. It differs for each loan and provider, but some only charge a couple of hundred dollars – so the benefits of paying early probably won’t be cancelled out.

No balloon payment at the end

Personal loans might come with a higher interest rate than what’s offered by a car dealer, but you won’t be landed with an additional large lump sum – called a balloon payment – when your loan term is up.

Use your car to reduce the interest rate

Some financial providers could let you use your car as security to get a lower interest rate.

Our fixed rate Secured Car Loan lets you use your car – even the one you’re looking to buy – as security to get a lower rate than our other personal loans.

Getting finance from a car dealer

Finance options from car dealerships can appear to have lower repayments than other financial providers, but they could end up costing you more in the long term.

Different car, different interest rate

You could get a different interest rate depending on the car make and model, your credit history and your income. This means you might get a higher interest rate if you’re not spending a fortune on a car or earning over a certain amount.

Paying off your loan early might not be possible

You might be on a low interest rate, but you could find yourself locked into a loan for a certain amount of time. And paying a loan off sooner than the loan term could result in extra fees.

Balloon payments

A car dealer might give you a portion of your loan interest free, resulting in lower repayments. Sounds great, right? Except that portion is owed at the end of the loan term in one payment – called a balloon payment.

So once you pay all your monthly repayments, you could still owe thousands of dollars – all due in one payment. If you aren’t prepared for the balloon payment, you might face extra fees and have to finance that amount at a higher rate.

Get an idea of your personal loan repayments

Browse our range of personal loans

Find a personal loan that’s right for you.

 

 

Need help choosing a personal loan?

Speak with someone from the team today.

Things you should know

The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. Also to the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accept no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.