New car loans
There’s nothing quite like a brand new car. The look, the feel, the unmistakable new car smell… Even if a new car costs a bit more to buy, it’s often money well spent.
To help you achieve your dream of impressing your friends by showing off your brand new car, RateCity has a variety of car loans available to compare from a range of different lenders. Several of these car loans are intended specifically for new car purchases, so it’s worth learning more about the available options and making sure you choose a new car loan that perfectly suits your finances.
What counts as a “new” or “used” car?
Different lenders use different definitions to determine whether a car counts as New or Used for the purpose of offering finance, usually based on the car’s age.
For example, a lender may count any car less than 2 years old as “new”, regardless of whether it’s coming straight from the factory, or if it’s had previous owners. The same lender may consider any vehicle more than 2 years old as “used”, and thus offer different terms and conditions when offering a car loan. Some lenders also have a maximum age for used cars that they’ll offer finance for.
What are the benefits of a new car loan?
Lenders tend to consider new cars to be significantly less financially risky than used cars. Because new cars are, well, NEW, they haven’t experienced the same kind of wear and tear as used cars, so they’re far less likely to break down and end up written off over the lifetime of a loan. What’s more, new cars are more likely to be sold at regulated dealers with full warranties in place, giving these vehicles additional security against defects.
What does this all mean for you? Well, because new cars represent less risk, many lenders will offer more favourable terms and conditions for new car loans, with lower interest rates and greater flexibility than for used car loans.
Are there drawbacks to new car loans?
Because new cars tend to be more expensive than used cars, taking out a new car loan often means saving up a bigger deposit and/or borrowing more money to buy your vehicle. Depending on your financial situation, a larger loan may take longer to pay back, which may mean paying more in interest over the lifetime of the loan.
Interest Rates and Comparison Rates
New car loans tend to generally have lower interest rates than comparable used car loans, due to the reduced risk they present to lenders. It’s still worth shopping around for a new car loan with a low interest rate, so you can enjoy lower repayments over the lifetime of your loan.
However, interest isn’t the only extra cost you may need to pay for a new car loan – there are also fees and charges to consider. These vary by lender and can be add hundreds to your loan.
That’s why RateCity has a list of car lenders’ application fees for your convenience. To get an accurate representation of what you would likely pay for the new car loan, consider both fees and interest.
Fixed Rate vs Variable Rate
Would you prefer to keep the repayments on your car loan stable from month to month, even if it means potentially missing out on some savings and flexibility?
A fixed rate car loan is worth considering if you want to prepare your budget in advance. By fixing your interest rate and repayment amounts at the start of your loan’s term, you can enjoy the security of knowing that every month will bring you one step closer a fully paid off new car, even when interest rates are rising across the market.
However, because fixing your interest rate in advance often also means agreeing to a pre-set repayment plan, you may not have the option available to pay your loan off early, even if you find yourself with extra money available further down the line.
A variable rate car loan has an interest rate that may rise or fall from month to month. If your lender passes on a rate cut, your payments may go down that month, allowing you to save a little money, or possibly get a bit ahead on your loan repayments. But if rates rise, you could find yourself coming up short against the higher repayments. This can make preparing a budget in advance a bit more challenging than with a fixed rate car loan.
Also, since variable rate car loans don’t lock you into the same kind of pre-set payment plans as many fixed rate loans, they’re more likely to offer greater flexibility in how you make your loan repayments and access additional benefits.
Early exit/extra repayment penalties
If you ever find yourself with money to spare, such as if you receive a tax refund or a bonus payout from work, or if a cut to your car loan’s variable interest rate means a smaller repayment than you expected this month, it’s worth thinking about putting some extra money onto your car loan. By getting your car loan paid off quickly and making an early exit, you may be able to ultimately pay less total interest on your new car.
However, not all car loans include an option to make extra repayments or early exits, with some lenders charging fees for doing so, to make up for the interest payments they’d be missing out on. Fixed rate loans for new cars tend to have more restrictions around extra repayments than variable rate car loans, though you should always check the terms and conditions to be sure.
If your lender makes it easy to pay extra money onto your car loan, but a financial emergency comes up and you could really use that extra money back in your pocket again, it’s good to know whether your car loan includes a Redraw Facility. This feature provides the flexibility to take any extra money you’ve paid onto your loan back out again with minimal fuss, subject to the lender’s terms and conditions.
Encumbrance/REVS Check Fee
Even if you’re buying a car that’s young enough to count as a new car to a lender, unless you’re buying it brand new straight off the showroom floor, it could still have money owing on it (aka a financial encumbrance) from a previous owner.
To avoid surprises when buying a used car, even if it’s relatively new, it’s usually worth organising a report from the Personal Property Security Register (PPSR), formerly known as a REVS check. You can organise this yourself, though many lenders can handle it for you when preparing your car loan, with some charging a fee for the service.
Because new cars can sometimes be a little pricier than similar used cars, it’s not always easy to save up the full deposit required for a new car loan. But there are options available if your heart is set on that one particular new car.
Some lenders offer high Loan to Value Ratio (LVR) car loans, which only require smaller deposits, and have you borrow a greater percentage of the car’s value. There are also 100% loans available from some lenders, which need no deposit, and instead have you borrow the new car’s full value. Because of the relatively high risk to the lender, these loans tend to have higher interest rates than other new car loans.
Compare new car loans
Ready to make a decision and choose a loan to help you buy a new car? RateCity lets you compare new car loans side by side and work out which ones will better suit your personal financial needs.
Once you’ve examined your options and have an idea of which lenders are offering the type of loans you want, you’ll be well on your way to driving home in your new car, with your finances under control.