Bolt Ons, Balloons and Repayments

A few tips on getting a Car Loan

While this article tends to assume the worst in salesman there are plenty of car yards and finance brokers out there that will look after you and have your best interests at heart. Just make sure you acknowledge the tips below to make your car buying experience a good one.

Know your repayments

Low interest rates are just part of the equation when it comes to car finance. In other words car yards can and do advertise cheap interest rates bump up the price of the car, tack on some fine print and the customer is none the wiser. It is worth noting that car yards are not governed by the same regulations as banks and mortgage brokers, so the transparency required for interest rate advertising differs. That's not to say that a finance broker won't try to pull the wool over your eyes either.

Beware of bolt ons

Make sure you get what you ask for. In the heat of the moment when you have a shiny new car sitting in front of you I can almost guarantee that you will accept deviations in what you originally expected. Extended warranties, overpriced floor mats, special servicing or a surprise monthly fee that you didn’t originally know about. An extra $10 a week sounds cheap but is $2,600 over the next 5 years.

Balloons or lump sum payments

If you’re going to have a balloon payment in your contract remember to set it at an amount that you will actually be able to afford when the time comes. For example no point having a balloon payments 3 years from now at $30,000 if you the car you purchase will be worth $20,000. Failure to recognise this might dent your pocket especially considering people who normally finance a car purchase typically do not have thousands of dollars lying around.

Don’t make repayments for something that you don’t have anymore.

When choosing how long you are going to get the loan for make sure you are realistic about how long you think you will have the car for. Generally speaking I wouldn’t recommend repaying a car loan for any greater than 5 years.

Bailing early

Make sure you ask if you can make additional repayments or pay out the loan early and more importantly understand the cost if you can. It might not be something that you’re planning on doing but life doesn’t always go to plan. Who knows where you’ll be a week from now let alone 3 years but it’s good to know your options.

Watch out for finance brokers

Brokers can get you seriously low interest rates on car loans, making your repayments even cheaper than if you walked into your bank today. This may seem strange but it’s true. What you need to be aware of is that unlike the sales of home loans, brokers set their own commission on a deal by deal basis. I am a broker and my advice is to keep an eye out for a brokers charging you more than 2% on the total loan amount. It is pretty competitive out there so you shouldn’t have a problem finding a good broker.

Read the fine print

Please read the terms and conditions. Chances are you won’t, even if you read this but you should. You don’t want to be surprised years from now especially when it comes to agreed value trade ins or the interest rates associated with the loan.

These tips are not exhaustive but I’m not naïve enough to think you would read an article longer than this that is assuming you get through this one. So, be careful, don’t rush and do your research it will save you in the long run.

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