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Comparing car loans could yield big savings

Comparing car loans could yield big savings

Jasmine* needed to borrow $30,000 to buy a new car, so she decided to do what she’d done last time and visit her regular bank.

But after speaking to a friend, Jasmine decided to research car loans, so she could see if there were any other options that might be better suited to her needs than what her bank could offer.

To her surprise, Jasmine discovered that Australia has dozens of car loan providers, offering hundreds of different car loan products.

In the end, Jasmine sourced her $30,000 car loan through Credit Concierge, an online car finance broker that itself works with more than 40 different lenders.

Jasmine was able to get a five-year car loan at an interest rate of just 4.79 per cent (comparison rate 5.34 per cent) – a much cheaper option than using one of the big four banks.

Data accurate as at 17 October 2019.

Jasmine applied for her car loan over the internet, although Credit Concierge also does phone applications.

Jasmine’s car loan, like all Credit Concierge loans, has a fixed interest rate, which means it will remain at 4.79 per cent for the entire five years of her loan.

She was charged a $400 upfront fee, and will also have to pay a penalty fee if she pays off the car loan early. This fee will vary depending on the length of her remaining loan term.

Look beyond the interest rate

It’s important to note that some borrowers might not be able to qualify for the same low interest rate as Jasmine. Lenders tend to give lower interest rates to borrowers with lower risk profiles, and higher interest rates to those with higher risk profiles.

Another important point is that the cheapest car loan might not be the best car loan for your situation. For example, a loan with a higher interest rate but more flexible repayment options might be more suitable for you. Also, a loan with a higher interest rate but lower fees might actually work out to be cheaper over the long term than a loan with a lower rate but higher fees.

* Jasmine is not a real person. This is a hypothetical case study.

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



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