Cheap Car Loans
How would you like to save money on your car loan? Are you hoping to make smaller repayments from month to month? Or were you thinking more about the total amount of interest, fees and charges you’ll pay over the lifetime of your car loan?
At RateCity, you can compare different car loan options, and work out which offers from which lenders can help to save you money. What’s more, you can learn more about which loans offer additional features that could be ideal for your financial situation, allowing you to enjoy greater value for money from your car loan.
Car loan term length
When selecting a car loan, it’s worth considering what’s more important to you – cheaper repayments in the short term, or paying less interest over the longer term. Some car loans can be paid back over the course of anywhere from one year to ten years, and the length of your loan term can have a big effect on both the affordability of your repayments, and how much interest you’ll end up paying in total.
By stretching out your loan over a longer period, you’ll be making a larger number of repayments, each one for a smaller percentage of the car loan’s principal, keeping your loan more affordable from month to month. But this also means being charged interest on more occasions, increasing the total amount you’ll be paying back to the lender.
Shortening the term of your car loan can make your monthly repayments more expensive, as each one will cover a greater percentage of the loan. However, the faster you can pay off your car loan, the less you’ll pay in total interest on top of the loan’s value.
So ultimately, you’ll have to decide what’s more valuable to you – cheaper repayments now, or paying less in total interest on your car loan.
Looking at interest rates
When it comes to finding a relatively cheap car loan, comparing the advertised interest rates is the logical place to start. The lower the interest, the less you’ll need to pay back on top of your loan, and the cheaper your monthly repayments will be.
It’s worth considering whether to opt for a fixed or variable interest rate on your car loan. If you find a fixed rate car loan with repayments that you can comfortably afford, you can be confident that this rate won’t change over the term of the loan, even if rates are rising across the market. However, you also won’t get to enjoy the savings from cheaper repayments if the lender cuts rates.
If you choose a variable rate car loan, your cheap car loan repayments could get even cheaper if rates fall, though they could also become more expensive and leave you out of pocket if rates raise instead.
Comparing Comparison Rates
Even if you find the car loan with the lowest interest rate currently on the market, that’s no guarantee you’ll be getting the cheapest possible deal. A car loan with a low interest rate but high ongoing fees and charges may turn out to be more expensive overall than a higher interest car loan with lower fees and charges.
To get a more accurate idea of the relative costs of different car loans, check out the comparison rates, which combine each loan’s advertised interest rate with its standard fees and charges.
Keep in mind that even the comparison rate won’t include every additional cost associated with a particular car loan, such as any nonstandard fees and charges. It’s also worth looking beyond the comparison rate and working out whether the features and benefits of different loans will provide greater value for your money.
Secured car loans
To enjoy cheaper monthly car loan repayments, you’ll need a lower interest rate. To enjoy a lower interest rate, you’ll need to reduce the lender’s level of risk.
One way to help reduce your lender’s risk is to opt for a secured car loan, where the money you borrow is guaranteed against the value of the car you’re buying. If you default on your loan repayments, the lender will repossess your car and sell it to reclaim its value.
Some lenders only offer secured car loans to borrowers who are buying new cars, or certain used car models under a certain age, to better ensure the car retains enough value to guarantee the loan. If the car you’re buying doesn’t fulfil this criteria, you may be able to opt for an unsecured car loan instead. While these loans can be used to purchase a greater variety of different vehicles, their interest rates can be higher than those of similar secured loans.
Cheap car loan features
If keeping the cost of your car loan down is important to you, there are a few useful features to keep an eye out for.
While some lenders prefer that you pay off your car loan according to a prearranged payment plan, some will allow you to make extra repayments and get ahead of schedule. The more of your loan you pay off, the closer you’ll get to exiting the loan early and paying less in total interest over the lifetime of the car loan. Keep in mind though that some lenders charge early exit fees if you pay your loan off early, to make up for the interest they’d be missing out on. Make sure that paying off your car early doesn’t accidentally cost you more than you expected!
Some car loans are also available with a Redraw Facility – a feature that allows you to withdraw any extra money you pay onto a car loan in excess of your scheduled repayments. This added flexibility can be handy, as you’ll be able to get ahead in paying off your car, and still remain confident that you’ll be able to withdraw these funds again (subject to the lender’s terms and conditions) in case of emergency.
Before you buy…
If you’re taking out a car loan to buy a car that’s had previous owners, it’s usually worth ordering a report from the Personal Property Securities Register (PPSR). Formerly known as a REVS check, this report will let you know if the car is being sold with a financial encumbrance, AKA money still owing on it from a previous owner. Some car loan providers can take care of organising this report for you as part of their service, though some will charge a small fee.
Who offers cheaper car loans – banks or non-banks?
When you’re searching for a good deal on a car loan, going to a bank can often be good first step. While car loans from banks aren’t always the cheapest options available, they can often provide great value, such as by bundling access to the bank’s other financial features along with the car loan.
Alternatively, non-bank lenders such as a building societies or credit unions can often offer car loans with competitive interest rates, as well as more flexible loan terms that can be adjusted to suit different financial situations. However, these lenders may not be able to offer as many useful features with their car loans as certain banks, and if you choose a non-bank lender, you won’t have the option to drop into a branch to go through your car loan’s terms.
Cheap car loans at RateCity
Finding a cheap loan for a new or used car doesn’t have to be a struggle. RateCity puts all of the essential information on a wide variety of car loan offers in one place, allowing you to quickly find the lender offering the greatest value.
For more information, tips and news regarding car loans, you can visit RateCity’s Car Loans Guide and Car Loan News.