Finance options to buy a car

Car loans

If you are intending to purchase a car but haven’t had any funds or savings to be able to do so, getting a loan to finance a car can be your best option.

Most car dealers offer to arrange the finance for you as part of their package if you choose to purchase the car from them. But getting the loan from them is not the best idea. Their rates are usually higher that the standard rate from banks or credit unions and any other places.

Make certain that you shop around for your car loan as variation on interest rates, related fees and charges exist. Take into account that it’s not a requisite for you to accept the finance proposed by the dealers – you have the prerogative to scour the market for a better finance opportunity and by doing so would see to it that you get the best arrangement that’s compatible with your situation.

Its time well spent if take time to put side by side and evaluate the terms of loans and interest rates offered by diverse financial institutions to gain the best possible deal.

See to it that plunge into a commitment that you can comfortably repay.

Before you sign up for a loan, make sure you understand:

• The type of loan on offer
• All fees and interest rates, including insurance requirements
• The monthly repayments and interest dates, and
• The total amount you'll have to pay by the end of the loan period

What will I need to budget for?

You've found your dream car. You're happy with the price tag... but wait... there's more!

It’s only the start of your financial obligation for the advertised price of your car. There are additional obligatory expenses that need to fit into your budget such as,

• Car registration (new window) including mandatory third party insurance
• Government stamp duty (new window) and transfer fees (new window)
• The dealer's delivery charge (for new car buyers only)
• The number plate fee (only in certain circumstances)

Ensure that you’re financially capable to cover all of the essential expenses.

Optional expenses that could be included in your budget are extended warranty or a mechanical inspection by the RACV (new window) or Victorian Automobile Chamber of Commerce (new window). You may also have to budget for optional extras like extended warranty, or a mechanical inspection by the RACV (new window) or Victorian Automobile Chamber of Commerce (new window).

Usually overlooked expenses are the day-to-day running cost, so see to it that it’s included in your budget. These consist of:

Insurance as an added cost to the expense you covered as part of your car registration fee, which will compensate the dame to and caused by your car. Insurance entails a big financial responsibility so see to it that this is included in your budget.

Fuel, regular services, spare parts and repairs – take into account that it would be more costly to service a car with a reputation for reliability.

What if I can't make the repayments?

If there’s a relapse on the payment, your security deposit will probably be in the possession of the lender. Now, when you made the car the security itself then it can be repossessed and sold for less than what you owe on it. In this kind of situation, you may end up having an outstanding amount on the car which you to still pay for – the car being no longer your own property.

If you’re struggling with your financial situation in terms of payment for the loan, it’s critical that you sit down with your finance company and talk about it. This way you can come up with an equally agreeable compromise and could help you wiggle out of your financial liability. See the 'Saving & spending' pages for more information on managing your debt.

What are my rights and responsibilities?

It is imperative for credit providers to inform you of your rights and responsibilities under the Consumer Credit Code. In the written contract, pertinent details should be included such as interest rates, fees and commissions. Read and scrutinize the contract, ask questions in order to understand your liabilities.