Financing a vehicle can be a bit of a minefield to navigate, especially if you don’t have much experience in comparing options and therefore aren’t sure what to look out for.
So what are the most important considerations to keep in mind and points of comparison to weigh up as you go about choosing a car loan in Victoria? Let’s explore all of the most important points so you can enjoy frugal motoring without making compromises.
Get to know the main types of finance packages
With every financial decision relating to your vehicle, whether that might be working out how much is car insurance in Victoria or looking into loan options, information is your ally. In this case, you can’t make the right decision unless you understand the differences between the specific car loan deals that are on the market right now. These include:
Personal loans
Standard loans can be used to purchase vehicles, with either secured or unsecured varieties available to modern motorists.
With a secured loan, the vehicle itself is the collateral, meaning that the lender can repossess it if you don’t adhere to the repayment schedule.
An unsecured loan will leave your assets untouched if you cease repaying it, but higher interest rates will apply because the lender is taking more of a risk.
Hire purchase
Increasingly popular, hire purchase agreements are a little like long term rentals, albeit with the option to buy the vehicle outright at the end of the fixed term contract. A deposit will typically be required, and you can choose not to buy the car once the contract has ended.
Lease
Similar to a hire purchase agreement, but with more of a focus on leasing, this is a good way to get a new vehicle without committing to a large lump sum at any point. Again, this is effectively a long term rental.
Investigate interest rates
The amount of interest your lender requires on your car loan will have a major impact on its affordability. The lower the rate of interest, the smaller your monthly repayments, and vice versa.
Lots of factors impact the interest rate you’ll be offered, from the amount of deposit you put down to the type of loan you pick and your credit score. Different lenders also have different deals in this regard, so comparing as many as possible is better than going with the first you find.
Analyze loan terms
Another aspect of a loan which will determine its affordability is the term over which it is to be repaid by customers.
Longer term durations may offer lower monthly repayments, but have higher interest rates attached and lead to you paying a larger total sum.
Shorter term loans will typically come at a higher cost month-by-month, but with lower interest attached.
Then there are deposit requirements and final payments to compare. With hire purchase and lease agreements, there may be a so-called balloon payment lurking at the end of the contract, giving you the option to buy the vehicle outright or give it back, as discussed earlier.
Assess your budget
Most importantly of all, you need to look at your own budget to decide if a car loan is cost-effective. Even if the deal looks good on paper, if you can’t afford the repayments along with your other obligations and outgoings, or without taking unforeseen circumstances into account, then it will leave you in a tricky situation.
In essence, you should never rush into securing a car loan, and remember that the best loan has to fit your needs, not force you to conform to its requirements.
