You’ve found the perfect car, taken it for a spin, and you’re just about ready to go ahead and make it yours. But in all of your excitement, you forgot to research one of the most important aspects of your purchase. No, we’re not talking leather vs. cloth interiors, we’re talking about the not so cool matter of securing a loan for your new ride.
Now before you dive in and sign yourself up for five years of dealer finance, perhaps you should read a little more about car loans, so you know what to expect.
The deposit
This is the lump sum you pay at the start of your loan that helps keep your monthly payments within an affordable range. The bigger the deposit, the lower your payments. And while some lenders set a minimum deposit for various loan amounts, you should be able to negotiate how much (or little) you have to pay up front.
The payment terms
Most car loan payments come directly out of your bank account via direct debit. You can often choose to have the payments go out weekly, fortnightly, or monthly.
The loan term
This is the period of time it takes for you to pay back your loan. It can run anywhere from 12 to 120 months (yes, that’s ten years) depending on the type of loan. The longer term is really beneficial for those who want to have lower payments and drive the same car for a long time.
The rates
Variable or fixed, your interest rates determine how much extra you need to pay on top of the money borrowed. Working out the interest is quite complicated, but it does pay to have a good idea of the rates currently on the market before calling a lender. This is where a finance broker comes in handy.
The exit fees
Surprisingly, a lot of people don’t realize that they must pay a fee if they want to pay off their loan early. It’s there in the fine print of most car loans so make sure to check yours before signing on the dotted line as some fees can be quite high. Car loans by Stratton are exempt from these fees if the borrower takes out another loan with Stratton. It’s called a loyalty bonus offer, and it’s pretty unique in today’s market.
The balloon payment
This is the residual value of the loan once the loan term is complete. In simple terms, it’s the money you still owe on the car, and if you pay it, the car is yours outright. You can also refinance the car to make this payment.
The tax perks
Unfortunately, car loans only offer tax savings if you use the car for business. If it’s for personal use, then you’ll just have to pay your GST. Business owners should check out the ATO website or consider commercial financing products as they may save a little more through leasing.
One word of advice for you as a bonus tip of sorts.
Remember we mentioned dealer finance earlier? Well, we strongly advise you to avoid it at all costs. It’s often more expensive and can sometimes tie you to the dealer for servicing and maintenance. Your best bet is to shop around the finance companies, talk to your bank, or better yet, call a broker to help you out.
Whatever approach you take, just make sure that you take time to think it over. No financier with an honest bone in their body will push you to make a decision on the spot, so once you have a few options, take a day or two to mull it over before making a decision. After all, car loans are a major financial responsibility.
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