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The car finance issue is a tricky one, particularly because cars go down in value as time goes by. There's no helping it, though. If you need a car, you have to get one, so the best thing to do is calculate everything to the tiniest detail.
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Comparing all the finance options comes next. There are various ways to finance your new car, the most popular ones being bank loans, credit union loans, finance company loans, and revolving credits. Banks and credit unions offer pre-approved loans, which is to say you will know how much you can borrow before making the final decision. The latter are usually offered by the dealer and are part of the purchase process. Revolving credit loans imply extending your mortgage, which allows for borrowing at the mortgage interest rate. This might be good news since home loans always have lower interest rates due to the fact that paying them off takes considerably longer time.
To finance cars you will need a long-term strategy. Opting for a vehicle loan spells commitment preceded by in-depth calculations on your part. Usually, car loans are to be paid off within up to 48 months, which means they have higher interest rates than, say, home loans that take considerably longer to repay.
There are many different car loan types catering to a wide audience. They can be generalized a bit, though, as to be made easier to understand. In a very broad sense of the word, car loans can be secured or unsecured and have either fixed or variable interest rates. Browse Glimp for a detailed explanation of car loan types. Contact us for calculations and additional help!
At a glance, secured car loans have lower interest rates, as the lender is guaranteed to repossess the car should you fail to pay the loan off. The tricky part with this loan type is that, as stated above, cars go down in value. If the sale of the car fails to cover your outstanding debt, you will need to make additional payments to cover up for the shortfall. As for unsecured loans, they have higher rates, but are often deemed more preferable by the buyer. To qualify for an unsecured loan, however, you must meet certain requirements, such as having a savings history or a beneficial previous loan/credit outcome. As regards interest rates, they can be either fixed or variable. The latter are lower initially and can go either up or down later on. Fixed rates remain unchanged throughout the term and are, therefore, higher than variable rates.
Whichever car loan type you are after, look for the no early exit penalty feature, as it will allow you to pay off your debt sooner and make for considerable savings. Compare car finance rates here to make the best out of your circumstances.
On top of interest rates, cars on finance incur some additional costs as well. These are clearly stated in the documents provided by the lender, so make sure to read them carefully. What you should expect in this regard is a loan establishment fee and, in some cases, optional warranties or insurances. The best course to take is to calculate these additional costs for the full repayment period. If the loan does not come with the no early exit penalty feature, you might also come to face the break fee. Defaulting fees are the norm regardless of the loan type.
As you can see, there are more things to consider than just interest rates. Ask the lender about your obligations in detail to avoid unpleasant surprises later on.
There's more about car finance than meets the eye. For one thing, some lenders might offer a loan repayment insurance. It guarantees the full repayment to the lender even if the buyer is gone or loses income, as the insurer will step in. To be sure, the loan repayment insurance is expensive, and also good to know is that interest rates need to be paid on it to boot.
If you aren't keeping up, don't worry just yet! Lenders are obliged to provide a disclosure statement, which outlines all charges and fees, possible changes to interest rates, and information on how interest is calculated and what happens if you fail to make a payment.
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As far as loans go, they are not exclusively offered by the bank. Credit unions and finance companies are also an option. As a rule, dealers offer car finance through their preferred institutions, but be careful with these, as there are additional charges attached to them (dealer commission, e.g.). Finally, family finance might be the cheapest way to get a new car, as certain personal loans have low to non-existent interest rates. Paraloan is recommended for people with physical disabilities and MAS - for medical professionals.
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Everyone hopes defaulting under the agreement will never happen. Various insurance options can help guard against this eventuality, but what happens if you don't have one?
Regular car finance payments are a must. If you default and the loan is secured, the lender will repossess the car. The problem with car sales is that they may or may not cover your outstanding debt. Cars go down in value, remember? You'll still need to think about the shortfall if unlucky.
Fortunately, these unfavourable situations are rare. If you don't want to even think about this scenario, opt for a loan repayment insurance. It will cost an arm and a leg, mind you, so best backtrack to step one: assess your monthly budget properly before even considering a car loan.
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Great getting the broadband at a cheaper rate for 6 months but didnt score a good deal for the power - paying a little more than the one I was with.