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New car sales activity revs up in June as bargain hunters snap up EOFY deals
Car shoppers were out and about in June, with more than 110,000 new vehicles sold in the month.
Choosing a car loan with a fixed interest rate, such as with seven year fixed rate car loans, means your repayments will stay the same.
This allows you to know exactly what your repayments will be over the life of the loan, allowing for more certain budgeting.
Unlike variable interest rates, which may rise or fall, a fixed interest rate will stay the same. This means your repayments will stay the same until your car is fully paid off.
What are seven-year fixed rate car loans?
A lot of fixed car loans let you choose a loan term of between one to seven years, or even longer.
A car loan with a longer term means your repayments will be lower and probably more affordable compared to loan with a shorter term.
However, as time is money, you will pay more in interest costs over the life of the loan compared to a loan with a shorter term, where repayments will be higher, but interest costs less.
Why do people use seven-year fixed rate car loans?
Choosing a fixed rate car loan can make it easier to manage your household budget. Because the interest rate won’t rise or fall, you can make steady progress towards paying off your car loan.
On top of that, choosing a car loan with a longer term splits up your loan up into several more affordable repayments compared to a shorter loan.
What are the main features of a seven-year fixed rate car loan?
A seven-year fixed rate car loan shares many features with other personal loans and car loans, including:
- Advertised rate: The extra you pay back on top of the money you’ve borrowed.
- Comparison rate: This rate helps you work out the true cost of a loan, by reducing to a single percentage figure the interest rate plus most fees and charges on a loan.
- Fees: Car loan fees can include upfront fees, early exit fees, and missed payment penalties.
- Extra repayments: Some lenders let you put extra money towards your car loan. This can help you exit the loan early and pay less interest. This is not common on fixed rate car loans.
- Redraw facility: If a car loan allows extra repayments, a redraw facility lets you take this money back out again if you need it. Again, this is not common on fixed rate car loans.
Pros and cons of seven year fixed rate car loans
- Choosing a longer loan term can help make your car loan repayments immediately more affordable, reducing their impact on your monthly household budget.
- A fixed can makes budgeting simpler too, as your repayments will never change. Even if your lender raises its interest rates, you'll keep paying the same.
- The main downside of a fixed loan is that if your lender lowers interest rates during your car loan term, you’ll keep making the same fixed repayments, and miss out on interest savings.
- If you take out a longer loan term, the main drawback is that you will pay more in interest costs over the life of the loan. That’s because you will need to make more repayments and you’ll be charged interest more often, and pay more in total interest costs than you would with a shorter-term loan.
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Your credit history is a record of the dealings you’ve had with credit providers such as banks, credit card companies, mobile phone companies and internet companies. Your credit history records how successfully you’ve managed your repayments. It also records how many credit applications you’ve made and how many of those were rejected.
Credit providers refer to your credit history when deciding whether or not to extend you credit. Missing repayments is a bad sign; making too many applications or having applications rejected can also be a bad sign.
Credit infringements can remain on your credit history for five years – or seven years for serious infringements.
Student car loans are not a necessarily a product in and of themselves, but what you may be looking for is a guarantor car loan.
A guarantor car loan has a third-party act as a form of guarantee for your loan application, telling the bank or lender that if you default on your loan, someone will pay the loan repayments.
Going guarantor on a car loan is no new thing, and before internet-based credit scores, guarantor car loan applicants would apply for loans with a guarantor or property owner who could vouch for the person borrowing the loan.
To get a guarantor car loan, you’ll need someone willing to act as a guarantor for your car loan.
There are four different ways you can get a car loan. You can go straight to a lender. You can get a finance broker to organise a car loan for you. You can get ‘dealer finance’ – which is when the car dealer organises a car loan for you. Or you can organise your own car loan through a comparison website, like RateCity.
Whichever method you choose, you will need to provide proof of identification, proof of income and proof of savings. So you may be asked for any combination of passport, driver’s licence, bank statements, payslips, tax returns and utility bills. You might also be asked to provide proof of insurance.
There’s no set number. That’s because borrowing capacity differs from person to person, as well as lender to lender.
Lenders don’t give out car loans unless they’re confident they’ll be repaid. Each person is different, so the amount of money one person can successfully borrow will differ from another person’s number. Also, each lender uses its own formulas to calculate borrowing capacity – so Mr & Mrs Smith might find that while Lender X will give them a car loan for $20,000, Lender Y will offer only $18,000.
A car loan, also known as vehicle finance, is money that a consumer borrows with the express purpose of buying a vehicle, such as a car, motorbike, van, truck or campervan. Car loans can be used for both new and used vehicles.
Historically, finding a great car loan would require excess research ranging from visiting an excess of websites or making phone calls, but technology has moved on. Using RateCity, Australia’s leading financial comparison service, you can check out great deals from a range of lenders on the one site.
To start, select the amount you want to borrow and the length of the loan, narrowing your search to show just fixed or variable interest rate results.
Once you’ve indicated your search criteria, you’ll see an immediate list of lenders, ranked by interest rate or application fees. You’ll also be able to view the monthly repayment amount for each result, helping you to know what you can afford.
Up to six products can be compared side-by-side, complete with more information about each car loan, giving you more information about your options.
When comparing your car loan options, it’s ideal to keep in mind some points find a great car loan for your needs. Consider the following:
- Choosing a low interest car loan can reduce costs
- Selecting an option with low fees and charges is ideal, because these can really add up
- Be aware of penalties, such as early exit penalties if you pay off the loan sooner than expected
- Consider the features that best suit your situation
There are many ways to ensure that you get a great car loan. Ultimately, you’ll end up with the best deal by doing your research and selecting the most suitable product for you.
A car loan calculator is an online tool that helps consumers understand how much they would have to repay under different scenarios. Consumers can create these different scenarios by entering different borrowing amounts, interest rates, loan terms and repayment schedules into the car loan calculator.
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