Get into a new set of wheels…
…without getting into hot water
1. Establish a realistic budget
Owning your own car is a great feeling, but the glow wears off quickly if it forces you to sacrifice the good things in life. So the first step is to calculate how much you can afford to repay and how much you can spend.
Add up all your monthly expenses, subtract that from your monthly income and whatever’s left – less a contingency for unforeseen costs – will be the amount you have available to potentially cover personal loan repayments.
You may find our budgeting tool helpful when completing this task.
2. Identify how much you can borrow
Our borrowing power calculator makes this a cinch. Factor in any spare funds you have to contribute, subtract an allowance for insurance and on-road costs or stamp duty and the calculator will show roughly how much you can afford to spend on the car.
3. Work out your vehicle requirements
To help focus your search, ask yourself:
where you’ll be doing the bulk of your driving
whether you’ll be parking in secure locations
what conditions you’ll be driving in
what balance you’re seeking between performance, efficiency, practicality and style
what safety and other features are important to you.
4. Choose between new or used
There’s an obvious price difference here, but there are also many other factors to consider.
New cars can offer peace of mind and are likely remain mechanically sound for many years after purchase. You will also find that later models will have better safety and fuel efficiency. But depreciation can also be an issue with new cars losing up to 40% of their value in the first few years of ownership.
Used cars will save you money on the purchase price but this may be eaten up in maintenance and fuel costs depending on the age of the technology in the vehicle you purchase. Plus the older the vehicle the less modern safety features you will likely get such as airbags and driver aids.
5. Re-check your numbers
Once you’ve decided on a car, you need to re-check your numbers. Get a firm insurance quote, turn your estimate of on-road costs (for new cars) or stamp duty (for used cars) into a real number, and make sure that you have enough money to cover everything.
Comprehensive insurance is essential if the car will be offered as security for a loan, and well worth considering anyway.
6. Arrange formal loan approval
Car loans come in a few simple variations – secured and unsecured, fixed and variable. Secured loans are almost always cheaper, while fixed-rate loans offer certainty and potentially lower rates.
When comparing lenders, make sure you consider all the costs. Dealer finance at a rock-bottom rate could end up costing you a lot more if the loan is weighed down with fees and hidden costs. Make sure you can repay your loan at any time without penalty. And you should be able to make extra repayments whenever you want, which will reduce the interest you pay. Redraw is also a handy feature.
This is general advice only and doesn’t take into account your objectives, financial situation or needs. Conditions, fees and lending criteria apply and are available on request.