Before we get into the three car finance tips, watch this quick video from Trevor.
Don’t just look at the weekly repayments
Car finance is one type of asset finance, so if you are comparing finance for vehicles, equipment or business assets more broadly, you may also want to read our full asset finance guide.
When comparing car finance, it is easy to focus only on the weekly repayment.
A lower weekly repayment can make a car feel more affordable, but it does not always mean the loan is cheaper overall. The full cost of the loan can depend on the interest rate, loan term, fees, balloon payment and total amount borrowed.
For example, a loan with a lower weekly repayment may end up costing more if it runs for longer or includes a large balloon payment at the end.
Before choosing a loan, it is worth looking at:
- The interest rate
- The comparison rate
- Monthly or weekly repayments
- Loan term
- Establishment fees
- Ongoing fees
- Balloon payment, if applicable
- Total amount payable over the life of the loan
The repayment amount matters, but it should not be the only number you look at.
For a broader consumer guide, Moneysmart also explains how car loans work and what borrowers should compare before choosing finance.
Understand how the loan term changes the cost
The loan term can make a major difference to the total cost of your car finance.
A longer loan term can reduce your regular repayments, which may help with cash flow. However, it can also mean paying interest for a longer period. That may increase the total amount paid over the life of the loan.
A shorter loan term may come with higher repayments, but it can reduce the total interest paid if the loan is paid off sooner.
This is why two loans with similar rates can still have very different outcomes. The repayment might look manageable, but the full cost can change depending on how long the loan runs.
Before choosing a loan term, ask yourself:
- How long do I plan to keep the car?
- Can I comfortably manage the repayments?
- Do I want lower repayments or lower total interest?
- Is there a balloon payment at the end?
- Will the car still suit my needs in a few years?
The right term is not always the longest or shortest option. It depends on your budget, goals and how you plan to use the vehicle.
Get your finances in check before falling in love with the car
It is easy to find the car first and think about finance later. But this can create problems if the repayments, loan structure or approval conditions do not match your financial position.
Before getting attached to a specific car, it is worth reviewing your finances and understanding what you may be able to borrow.
This can help you shop with a clearer budget and avoid wasting time on cars that may not suit your situation.
Before applying for car finance, it may help to check:
- Your income
- Existing debts
- Living expenses
- Credit history
- Deposit or trade-in amount
- Ongoing car costs such as insurance, registration and servicing
Getting your finance position reviewed early can also give you more confidence when speaking with a dealership or private seller.
Instead of asking, “Can I afford this car?” after you have already chosen it, start with, “What car finance options actually suit my budget?”
Related reading
Car finance is only one part of the broader asset finance space.
If you are also looking at finance for trucks, vans, boats, motorcycles, caravans or business equipment, read our full asset finance guide for a broader breakdown of how asset finance works.
How LoanBrix can help with car finance
Car finance is not just about finding a repayment that looks affordable. The structure of the loan can affect your cash flow, flexibility and total cost over time.
LoanBrix can help compare car finance options and explain how different rates, terms and repayment structures may affect you before you commit.
We can assist with:
- New car finance
- Used car finance
- Dealer or private sale finance
- Car loan refinancing
- Personal car loans
- Business vehicle finance
- Comparing loan terms and repayment structures
Before signing a contract or choosing finance at the dealership, speak with LoanBrix to understand what options may be available.
Learn more about car loans in Melbourne or contact LoanBrix to discuss your car finance options.
