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Prospective car buyers are in for “excellent deals” this August, Federal Chamber of Automotive Industries chief executive Tony Weber said last week during the release of new vehicle sales data for July 2019.
A total of 83,184 new vehicles were sold. While year-to-date growth is still down 7.7%, this is better than June’s 8.4%.
From $1,000 in factory bonuses on Hyundai’s Tucson range, to a $6,000 discount off Fiat’s Abarth 124 Spider and the $44,990 drive-away price of Holden’s Colorado LSX, today’s buyers have so many options to choose from.
Since purchasing a car is likely one of the priciest transactions you’ll ever make, it pays to be well-informed and to do it right.
Types of Loans
Car loans come in different forms. You can personally apply at a bank, credit union or loan company unlike in dealership finance where the dealer does the work for you.
This type of loan has a lower interest rate than an unsecured loan because the car you’re buying will be used by the bank as a security. Westpac requires the car to be loaned to be less than seven years old. Meanwhile, the Commonwealth Bank of Australia offers secured loans for brand new cars and those below five years old.
No asset will be repossessed in case you fail to make repayments for this type of loan. However, they come with a higher interest rate.
Fixed rate or variable rate personal loan
With a fixed rate loan, you will know how much the repayments will cost for the life of the loan even if the interest rates will go up. Meanwhile, under the variable rate loan, you can make additional repayments to complete your loan faster or redraw available funds when needed.
Points to Consider When Scouting for the Best Loan Deal
To find the most competitive and suitable loan for you, check the following:
If possible, find out how you can acquire a lower interest rate.
Actual loan term
Verify if your repayments will pay off your loan or if the lender will require you to pay more by the end of the loan term.
Ask how often repayments must be made and if you can repay your loan early without being penalised.
Verify if your lender charges extra for account, administration or establishment fees.
Ask if they want the vehicle to be insured, especially if you will apply for a secured loan where your car becomes collateral security.
Loan Approval Process in Australia
1. Filling in application forms
Applications will normally require you to provide details of the car you’re buying, proof of your identity and proof of your ability to make repayments. You will have to inform your chosen lender about your income, assets and liabilities such as other loans you may have or credit cards you own. You must also be ready to provide your credit rating. You may get your rating for free at Equifax Australia (formerly known as Veda), Dun & Bradstreet, Experian and Get Credit Score.
2. Review of application and conditional approval
The duration of approvals can vary from one institution to another—from within seconds to up to 3 months. It is advisable to get your pre-approval before you start car-hunting.
3. Signing of loan documentation
In this stage, you formally sign the agreement where you promise to repay the amount borrowed over a specific length of time at an agreed interest rate.
4. Release of the loan
The funds will be paid as a check or directly to the person or dealer where you’re buying the car from if it’s a secured loan. Dealerships do not directly receive the funds if it’s an unsecured loan.