How to make smart financial decisions when buying a car
Buying a car can seem like a complicated process, and with any big financial responsibility, you want to be certain you make the right decision.
Do your research and consider the pros and cons of buying a car, and whether it is right for you. A car loan is a good place to start, as it helps make purchasing a car much more affordable, meaning you can get the vehicle you need sooner.
Here are some of our top tips for making smart financial decisions when buying a car.
Work out your budget
Before looking at car loans, you need to know what you can afford. Make sure you’re in a good financial position where you can manage car loan repayments, whether weekly, fortnightly or monthly.
Your budget will determine whether you buy new or used, and what type of car you choose, as a lower purchase price means a smaller loan.
Choosing a used car in Auckland can save you money upfront, just keep in mind that it may cost you more in the long term if the car needs more maintenance and repairs, especially if it’s an older model. If you select the used car option, it’s a good idea to have it checked first and if possible, obtain a report of its previous history.
A car loan calculator is a good tool to help you work out what you may be paying in repayments and interest for your loan.
Consider the cost of car ownership
When buying a car, it’s important to consider more than just the purchase price. A car requires fuel, maintenance, and repairs to keep it running and in good condition. There’s also registration and insurance costs to consider.
Car maintenance can be expensive, and you need to account for this when working out your budget. Your car will need regular servicing, and upkeep costs generally increase with used cars.
Factor in how much driving you’ll do each week, and what you may be spending on fuel. Think about what car suits your needs, whether that’s a certain model or car size. The type of vehicle you buy will impact how much you spend on fuel.
Car insurance is a necessity when buying a car. You want to get the best price on your insurance as possible, and get the right level of cover in the case of accidents, theft, damage, or breakdowns.
Find the right car loan for you
Do your research to find the best car loans available and compare them to find the right one for your needs and budget.
With a car loan, you borrow the loan amount from the lender, and repay it over a set loan term. Loan repayments are calculated based on the borrowed amount, the interest rate, and the loan term. The interest rate is determined by the lender based on numerous factors, including the car’s value, the lender’s criteria and your credit score.
There are numerous types of vehicle financing available, so you need to consider your circumstances and decide which car loan is best for you.
If the car is primarily for work purposes, you may want to consider a novated car lease. This involves an agreement between you, your lender and your employer, where your employer is responsible for making the repayments on your behalf from your pre-tax salary. Speak to your employer if this is something they would be willing to do.
Consider whether you want a new or used car. A used car may be more affordable, with lower loan rates, but a new car can provide greater reliability. If you will be driving long distances, you want to buy a car that currently has low mileage.
Get the shortest loan period you can afford
It can be tempting to get a longer loan term, as this can make your repayments more affordable. However, any perceived amount you save with lower repayments, you end up paying back (and more) in interest.
Interest can add a significant amount to your car loan and the longer the term period, the more interest you end up paying on your loan overall. It’s generally a better financial decision to opt for a shorter term car loan, as long as you’re able to keep up with payments.
As well as choosing a shorter loan term, check the terms of your loan before signing to see if you’re able to make early or additional repayments, without any fees. This will give you the flexibility to pay your loan off sooner if you’re able to, potentially saving you a lot of money.
Seek expert advice
Buying a car may be a worthwhile investment, but it’s one you need to think about carefully to ensure you make a smart, financial decision.
With so many car financing options, it can be hard to know what the best choice is for you. Getting expert advice from a finance specialist ensures you get the best deal on your car loan.
A finance specialist can help you structure your loan to suit your needs and answer any questions you have about loan types, fees involved and the terms and conditions.
A 360 finance specialist will help you find the best car loans with the lowest rates so that you can get the car you need as soon as possible. Whether you’re considering a novated car lease, or need help with a car deal finder, 360 Finance can help.