How to get the best car loan in 2019



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Getting a car loan can be very confusing. There are so many strange processes to go through; so many strange finance words to decipher.

So it’s not surprising that some people end up with a bad loan – one that might have a high interest rate or excessive fees or too little flexibility.

There’s no definitive ‘best’ car loan, because what’s best for one person might not be best for another. But if you want a loan that minimises your repayments, follow these five steps:

  • Shop around
  • Save a deposit
  • Secure the loan
  • Reduce your loan term
  • Choose your preferred interest type

1. Shop around

The most important thing to do if you want the best car loan is shop around.

Sadly, your long-term bank is highly unlikely to reward you for your loyalty. They generally save their special deals for new customers they’re trying to entice not old ones they expect to keep.

There are a few different ways to shop around. One is to call lots of different lenders – effective, but time-consuming. Another is to go straight to a car finance specialist like Broli, which allows you to immediately compare more than 20 lenders, including big banks and low-rate providers.

2. Save a deposit

As a general rule, the bigger your deposit, the more likely a lender is to offer you a lower interest rate, lower fees and better loan features.

Deposits are measured in percentage terms. So a $5,000 deposit on a $25,000 car purchase (equivalent to a 20 per cent deposit) would actually be ‘bigger’ than a $7,000 deposit on a $50,000 purchase (equivalent to 14 per cent).

Got a deposit? Click here to see if you qualify for a car loan.

3. Secure the loan

Just as lenders tend to reward borrowers for larger deposits, they also tend to give the best deals to those who provide security (or collateral) – which tends to be the car itself.

If you choose a secured car loan, you’ll probably get a lower rate and lower fees than if you take out an unsecured car loan.

Click here to compare secured and unsecured car loans.

4. Reduce your loan term

One way to reduce the overall cost of your loan is to shorten the loan term – assuming, of course, that you can meet the repayments.

A shorter loan term means higher monthly repayments and lower total repayments, while a longer loan term means lower monthly repayments and higher total repayments.

For example, here are two different repayment scenarios for a $20,000 loan with a 7.50 per cent interest rate:

Loan term Monthly repayments Total repayments
3 years $622 $22,396
5 years $401 $24,046

5. Choose your preferred interest type

Interest rates come in two flavours – variable and fixed. Some lenders only offer one flavour, while others allow you to choose your favourite.

If you choose a variable interest rate, the lender can change the rate at any point during the loan term. So the rate might go down – but it also might go up.

If you choose a fixed interest rate, it will never change. So the lender won’t be able to jack up your rate when everyone else’s variable rate rises – but it also means the lender won’t reduce your rate when variable rates fall.

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