Compare Car Loans
Whether you’re looking to buy a new or used car, it makes sense to shop around, compare car loan offers, and keep your options open. To find the best car to suit your household, it’s often worth comparing the online and print classifieds, and taking a gander through multiple car yards, until you find that perfect set of wheels.
The same principle applies when it comes to sorting out your car’s finance. It’s always worth looking at the car loan market and comparing not just the interest rates from different lenders, but the features and extras that could make or break your choice of car loan.
You can compare a variety of different car loans in one place at RateCity, but it’s worth checking that you’re using the right information to make the most accurate comparison.
Where to start when comparing car loans
Before you start to compare car loans, have a think about how much money you’d like to borrow, how much time you’d like to pay it back, and how much you can afford to pay back per month. While it’s tempting to borrow the largest sum you can reasonably afford and pick up that luxury ride with all the extras, it’s usually more sensible to opt for a slightly more modest car, so your car loan repayments can be kept fairly manageable.
When working out the length of your car loan, remember that the shorter your loan term, the higher your repayments each month. However, if you go for a longer loan term with smaller monthly repayments, you’ll find yourself paying more in total interest over your loan’s lifetime.
Also, are you buying a brand new car, or a less-expensive used car? Some lenders offer different loans for new or used cars, making it a good idea to compare your available options. New cars (any car under a certain age that’s defined by the lender) are perceived as less financially risky compared to used cars by most lenders, so new car loans tend to have lower interest rates than used car loans. Of course, because used cars tend to be cheaper than new cars, you shouldn’t need to borrow quite as much money with a used car loan compared to a new car loan.
How to compare car loans
The most obvious place to start comparing different car loans is the interest rate, which is the extra percentage you’ll have to pay back on top of your loan repayments. Generally, the lower the interest rate, the cheaper the deal, though there are also other factors to consider when comparing different car loan offers, such as each lender’s fees and charges.
The Comparison Rate is an approximate figure that combines a loan’s advertised interest rate with its standard fees and charges, expressed as a percentage. This comparison rate can provide a more accurate representation of a loan’s overall cost than the interest rate alone, and can serve as a useful guideline for comparing similar car loans, helping you determine which may be best suited to you and your finances. Remember though, not every fee is included in a car loan’s comparison rate, nor does it account for extra features that could add further value to a loan. You can usually use comparison rates to help you narrow down your car loan choices, before you take a closer look at what each one has to offer.
Comparing Fixed Rate and Variable Rate Car Loans
Choosing a fixed rate car loan means agreeing in advance to pay a set amount of interest on top of each monthly repayment. Because your interest rate is locked in from the start, your monthly repayments will always be the same, which is nice and simple to slot into an existing budget, especially if you want to keep your finances stable. The downside of fixing the interest rate on your car loan is that if your lender cuts its interest rates, you won’t get to enjoy the savings. Plus, if you’re locked into a fixed car loan plan, you may lose some flexibility in your repayment options.
If you choose a variable rate car loan, your lender will adjust the interest rates they charge from month to month. If there’s a rate cut, your repayments will go down, saving you money. But if there’s a rate rise, your repayments will go up, costing you more. This can sometimes make budgeting for variable rate car loan repayments a little bit tricky when compared to a fixed rate car loan, though many variable rate car loans tend to have more flexible arrangements when it comes to making your repayments.
Comparing Secured and Unsecured Car Loans
Many car loans are secured loans, where the money you borrow is guaranteed against the value of an asset – usually the car you’re purchasing. If you don’t make your repayments, you lose the car so the lender can recover its losses. While this extra financial security means that lenders usually offer lower interest rates for secured loans, some lenders only offer these loans for particular car models, or for cars under a certain age, to better guarantee their finance against the vehicle’s value.
Unsecured loans, on the other hand, don’t require this same level of security, and thus can typically be taken out for a greater variety of vehicle types. However, to make up for the added risk to the lender, unsecured car loans often have higher interest rates than their secured counterparts.
When you compare secured and unsecured car loans, consider which option will better suit your finances, and the car you’re looking at buying.
What to look for when comparing car loans:
Early exit/extra repayment penalties – More often found on fixed rate car loans (which tend to have set repayment plans), but sometimes appearing on variable rate car loans (which often have more flexible arrangements), these fees are applied when you make extra payments on your car loan or exit the loan early, to make up for the interest payments the lender will be missing out on.
Redraw facility – If you’re able to easily make extra payments onto your car loan, a Redraw Facility will allow you to take that money back out just as easily, freeing it up for when you need some extra flexibility in your finances, subject to the lender’s terms and conditions.
Encumbrance/REVS Check Fee – If you’re buying a used car, it’s important to check it for any financial encumbrance, AKA money still owing on it from a previous owner. Several lenders can manage the paperwork of applying for a Personal Property Securities Register (formerly REVS) check as part of organising your car loan, though some will charge a fee for this service.
100% loan – If your credit is good but your savings aren’t as large as you’d like, you may find yourself unable to pay the deposit required for certain car loans. However, some loans are available with a high Loan to Value Ratio (LVR), so you pay less in deposit up front, and borrow more of the car’s value. Some lenders also offer 100% loans, where you pay no deposit up front and instead borrow the full value of the car. As these loan types represent greater financial risk to lenders compared to the other available options, they tend to have higher average interest rates.
Compare more car loans
RateCity puts car loans from a range of different lenders all in one place, so you can compare what they offer side by side, saving yourself time and hassle while you get the information you need to make a more informed decision.
Once you’ve looked at the available rates, and have compared other features, costs and benefits being offered, you can narrow down your car loan shortlist. Compare the options, find the right car loan for you, and get yourself on the road!