Some of the most important options to compare when choosing a new car loan include:
Secured vs unsecured loan
New car loans are commonly secured by the value of the car itself. Alternatively, you could buy a new car with an unsecured personal loan, but the interest rate will likely be higher.
The loan's interest rate will determine how much you pay in interest charges. Fixed interest rates will stay the same throughout the life of the loan, while variable interest rates can fluctuate with the market.
The car loan interest rate you’re offered will depend on a range of factors, including your credit score.
You may be charged upfront and ongoing fees on top of your interest payments, such as:
- Loan application fees
- Establishment fees
- Monthly fees
- Late payment fees
- Early repayment fees
- Exit fees
Combining a car loan’s interest rate with any standard fees, the comparison rate can give you a better idea of its total cost.
Some lenders offer additional car loan features that may appeal to you, such as the option to make extra repayments to pay off your car loan faster, and a redraw facility that lets you withdraw any of these additional repayments you've made if you need to.
The loan term is the length of time you have to pay off your car loan. Car loans often have three to five year terms, but sometimes longer or shorter terms are available. The longer the loan term, the cheaper the repayments, but the more you'll likely pay in interest.
When searching for a new car loan, it’s important to remember that no single car loan or provider can be the best choice for everyone. Understanding the various factors that affect your car loan could help you make an informed choice.
One quick and simple way to get a better idea of the potential value that different car loans offer is to look at their Real Time Ratings™. These star ratings combine the cost (e.g. interest, fees etc.) and flexibility (e.g. approval/funding time, extra repayments, redraw and early exit penalties) of each car loan, and are updated regularly to ensure improved accuracy.
Remember to take your time to compare various options and choose a loan you’re comfortable with. A car loan calculator can help you determine your monthly repayments for different loan sizes and interest rates. This may help you decide on a reasonable budget for your new car, so you can enjoy driving without financial stress.