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This car loan includes a satisfaction guarantee and $0 ongoing fees

This car loan includes a satisfaction guarantee and $0 ongoing fees

Sally’s* car was on its last legs, so she decided to buy a new Holden Commodore that would allow her to safely drive to work and take her children to school sport.

Sally decided to borrow $25,000 of the $35,990 purchase price. She turned to RACV for her car loan. She applied online, which took just 10 minutes. To complete the application, she had to provide her driver’s licence number, as well as details about her income, assets, liabilities and employment situation.

Sally was able to secure finance at 5.69 per cent (comparison rate 6.39 per cent). The loan was approved within five hours and paid out 24 hours after that – both of which are typical timelines, according to RACV. 

Car typeRACV advertised rateRACV comparison rate
New car loansFrom 5.69%From 6.39%
Used car loansFrom 6.49%From 7.19%

* Data accurate as of 19 September 2019

Sally had to pay a $499 upfront fee, although there are no ongoing fees during the life of the loan.

One thing that appealed to Sally was RACV’s Loan Satisfaction Guarantee, which allows borrowers to cancel their loan within 21 days. Borrowers must repay the loan, but RACV refunds any interest that has been paid and waives any fees.

Repaying a $25,000 car loan

One of the choices Australians face when taking out a car loan is choosing a lender. RACV is one option, but you might prefer another lender. It’s important to do your research because approval times, interest rates, fees, loan features and customer service differ from provider to provider. 

Another choice people have to make is whether to opt for a shorter loan term (which means lower monthly repayments but higher total repayments) or a longer loan term (higher monthly repayments but lower total repayments).

Here’s how much you’d have to repay if you took out a $25,000 car loan over three years: 

Interest rateMonthly repaymentsTotal repayments
5.69%$480$28,783
6.49%$489$29,342

Here’s how much you’d have to repay if you took out a $25,000 car loan over five years: 

Interest rateMonthly repaymentsTotal repayments
5.69%$757$27,254
6.49%$766$27,580

After doing her sums, Sally decided to choose a three-year term.

Sally knew that while her monthly repayments would be $277 higher ($757 v $480), her total repayments would be $1,529 lower ($28,783 v $27,254). She also liked the thought of being debt-free sooner rather than later.

* Sally is not a real person. This is a hypothetical case study. You can’t assume that you will always be able to qualify for the lowest interest rates or have your car loan approved as fast as Sally.

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This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.

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