Choosing A Car Loan

How to Choose A Car Loan

You may consider dealer finance to be a convenient and simple option if you buy a vehicle from a car dealer - just be aware that this convenience can cost you more money than alternative finance options.

Dealer finance generally has a higher interest rate than the finance products from financial institutions. It can also come with extra terms and conditions, such as a hefty fee for an early pay-out of the loan.

There are many other options - so take the time to shop around before signing anything.

What to look for in a loan

Shop for your loan before you start to look at cars.

Some of the variables you need to consider include:

  • The term of the loan - car loans often have a term of between one and five years, although some can run for up to seven years;
  • Interest rates - these can vary wildly depending on the term of the loan, the financial institution offering the loan, the loan amount and whether you want a variable or fixed rate;
  • Other fees and charges - check the fine print for establishment fees, annual fees, fees for paying out the loan early and fees for defaulting on a payment;
  • Repayments - can you make repayments weekly or fortnightly? This often saves money during the term of the loan; and This may sound obvious, but only commit yourself to a loan that you are confident you can repay.