The cost of owning a car may be top-of-mind for many drivers, with petrol prices reaching new heights. But it’s not all bad news for motorists, who are turning fuel price hikes into their own gain by taking this opportunity to shop around for variable rate car loans and saving money in the process.
Buying a more fuel-efficient model may be one way to offset rising petrol costs, but it’s not the most affordable option for all drivers. Instead, other clever motorists are discovering that the biggest savings can be found by reassessing your finance options, comparing interest rates and refinancing to better suit your situation.
Similar to home loans and personal loans, car loans are available with either fixed or variable rates of interest. As the name suggests, a fixed interest rate will remain steady for the period that you and your lender agree upon.
When selecting a variable rate car loan, it’s important to factor into your budget any possible movement to your rate, which may increase or decrease at your lender’s discretion. Consider how much above the initial repayments you would be able to afford and ensure you are able to service the loan if the rate was to jump by 2 percent. An increase to your variable rate such as this may mean you are required to make a higher repayment each month to meet your lender’s expectations.
The good news is that when rates decrease, it’s likely that your variable rate will take a dive simultaneously. In good times when you have a low interest car loan, it’s a good idea to continue making repayments at the higher level or even attempt to accelerate payments. By doing so you’ll be on track to owning your car sooner and be better prepared for any future rate rises or spikes in the cost of petrol.
Before switching to a new car loan it’s important to consider that you may be hit with fees by both your existing lender to exit a contract and establishment fees tied to your new loan.
The car loans table to the right displays some of today’s lowest interest rates for car loans.