May 19, 2011
For many Australians a car is the first major purchase they'll make. Unless you have a wealthy donor, then this may also be the first time you're exposed to debt.
While acquiring a car loan may seem simple enough, given that there are more than 320 personal and car loans available to be found through RateCity. The trick is to find a loan that will suit your needs and vehicle and one that will save you money in the long run.
Own your first car sooner. So you've got your license and have waited almost two decades to own your first set of wheels. But before you rush in to buying a car, spend 30 minutes crunching the numbers because it may save you thousands of dollars over the next five years. Here are our top tips to help you get the best car loan for your situation and save thousands of dollars in the process:
Take baby steps. Rather than splashing out on a flashy first car, consider starting small. Because even if you take out one of RateCity's top $30,000 five-year car loans, such as CUA's loan for new vehicles for more than $30,000 with an interest rate of just 8.69 percent, you'd have repayments of around $620 per month. Five years later you've repaid the loan, along with an extra $7200 to the bank in interest, plus your car has shrunk in value.
By setting your sights lower at a $20,000 car loan, one of the top rates available through RateCity is again with CUA, but at a slightly higher rate of 8.99 percent. Repayments decrease to around $410 per month and the total interest paid is around$4600 over five years.
Save for a deposit. Instead of paying the bank a repayment, we recommend that you put the equivalent amount of money - $410 each month - into a high interest online savings account. After 12 months you'll have saved $4920 plus interest.
With this $5000 deposit you'll be able to reduce your loan size to $15,000 with CUA and a rate of 8.99 percent, so you'll cut monthly repayments by around $100, which equates to $6000 over five years.
Shop around and save. You may be tempted to go with the first loan you come across, but you'll almost always benefit from shopping around to find a better deal on your car loan.
For instance, the average five-year personal loan has an interest rate of 10.76 percent. By comparison the CUA $20,000 car loan at just 8.99 percent will save around $20 per month in repayments, or $1200 after five years.
Clearly, it pays to break down the numbers and compare car loans, because there are some real savings to be had for minimal effort. Before you sign up, it's a good idea to also consider any fees and charges attached your car loan, because these can make a big difference to your overall savings.
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