How to Finance a Car

Owning your own car can provide you with an invaluable sense of freedom and convenience. But it can also be one of the biggest expenses in a person’s life and it’s not always easy to save the cash for the car you want. So if you’re looking to purchase a vehicle but don’t have the funds, you may need car finance. To help you make an informed decision, we’ll take you through how to finance a car, including the types of car finance available and how they work.

Overview:

• How does financing a car work in Australia?
  • Types of car finance
• A guide on how to finance a car in Australia
  • How to finance a car with bad credit
• Is car financing a good option?
• Car finance FAQs

How does financing a car work in Australia?

Whether purchasing a new or used car, if you don’t have the money to purchase a car outright, you may need to apply for car finance. Generally, car finance involves borrowing money to purchase a vehicle, which is then paid back over time with interest. Loan terms typically range between 3 to 7 years with a fixed interest rate and scheduled repayments of weekly, fortnightly, or monthly. However, how the process works will ultimately depend on the type of finance you choose.

Types of car finance

There are several types of car finance available in Australia:

If you’re unsure which finance option is best for you, it may be a good idea to speak with a personal loan broker. Personal loan brokers, like our team at Oceania Finance, can assess your individual circumstances and negotiate on your behalf to find the best rates and terms for you. Contact us today to speak with our team of friendly brokers!

A guide on how to finance a car in Australia

While a personal loan broker can do a lot of the hard work for you when acquiring finance for a car, it’s important to have a good idea of the general steps involved.

1. Assess your financial situation

Before you begin looking for a car or a loan, it’s important to assess your financial situation. Assessing your financial circumstances includes looking at things like:

• What your credit score is. Your credit score will affect what loans and lenders you are eligible for
• Your income
• Your expenses
• Any debt or other financial commitments you may have
• Future financial goals or targets you want to achieve, and how acquiring a new car loan could impact these
• Looking at your current budget, think about how much you could realistically afford to repay each month towards a car loan

2. Understand the financing options available

Because there are a range of financing options available when purchasing a car, it’s a good idea to ensure you understand each one. Understanding each option clearly will help you make an informed decision when choosing which solution is right for you.

This is where a personal loan broker can help. Personal loan brokers are experts at breaking down complicated industry jargon into more understandable terms. They will explain each option thoroughly and assist in selecting the one right for you based on your individual circumstances.

3. Research and compare lenders and loans

Once you’ve assessed your financial situation and have a good understanding of each financing solution, you can begin to research lenders and loans.
Research and compare:

• Interest rates
• Loan terms
• Fees (such as application fees, monthly fees, early repayment penalties, and discharge fees)

4. Get pre-approval

Pre-approval gives you a clear idea of your budget and strengthens your bargaining position with car dealerships. Submit an application with necessary documents like proof of income, identification, and credit history. The lender will assess your application and provide a pre-approval amount.

5. Choose your car

Decide whether to buy a new or used car. New cars may come with better financing deals, but used cars can be more affordable. Ensure the car meets the lender’s criteria, such as age and condition for a secured loan.

6. Apply for the Loan

Gather all the documents you’ll need to apply for the loan, this typically includes:

• Proof of income
• Employment details
• Identification documents (such as driver’s licence, passport etc.)
• Details about the car

Once you have all the documentation ready, complete the lender’s application form. This can often be done online, over the phone, or in person.

7. Loan approval and car purchase

Once approved, review the loan terms carefully before signing. Once you have signed and the loan is in place, the lender will either transfer the funds to you or directly to the car seller.

8. Repayment

Choose a repayment schedule that fits your budget—weekly, fortnightly, or monthly–and begin repaying your loan. It can be a good idea to set up automatic payments to avoid missing due dates and incurring late fees.

Financing a car can seem like a daunting process and sometimes it’s easy to feel overwhelmed. Consulting a loan broker can help to reduce the stress of the process and help you get the best rates and terms for your situation. A loan broker can do the hard work for you by:

• Checking your credit score and evaluating your financial health
• Researching and comparing lenders and choosing the most suitable options for you
• Guiding you through the application process
• Breaking down complicated terminology and industry jargon

For expert advice, friendly service, and access to a wide range of lenders, contact our team at Oceania Finance today!

How to finance a car with bad credit

While having a bad credit history or a low credit score can make it more difficult to find car finance, it’s not impossible. There are lenders who offer specialist car loans designed for borrowers with poor credit. It’s important to note that these loans often come with higher interest rates and fees due to the increased risk to the lender.

Is car financing a good option?

Car financing can be a good option if it fits well with your financial situation and goals. It allows for immediate ownership with manageable payments. But it also means you will be paying interest on top of the cost of your car, and it means committing to making regular payments on time.

Ultimately, whether car finance is a good option for you will depend on your individual circumstances. It’s important that you carefully evaluate your financial health, compare loan options, and consider both the advantages and disadvantages before deciding if car financing is right for you.

Still struggling with how to finance your car? Contact our team today! With experience dealing with every credit score and access to a wide range of lenders, we’ll help get the right deal for you.

Car finance FAQs

Does financing a car build credit?

Yes, financing a car can help build credit, provided you manage the loan responsibly and make regular payments. Failing to make timely payments can have a negative impact on your credit score.

What is the minimum credit score for a car loan in Australia?

There is no strict minimum credit score for a car loan in Australia. Different lenders have varying criteria and offer different loan products tailored to various credit scores. Typically, borrowers with higher scores are offered more favourable terms, while those with lower scores may face higher interest rates and stricter terms.

If you’re concerned that your credit score may hold you back from car finance, speak with an Oceania Finance loan broker today.

How long will a dealer hold a car with a deposit in Australia?

The length of time a dealer will hold a car with a deposit in Australia can vary depending on the dealer’s policies and the agreement made at the time of the deposit. Not all dealers ask for deposits or offer to hold a car for a certain period of time.

Can you get a car loan with no savings?

It is possible to get a car loan with no savings in Australia, however, you may need to seek out a no-deposit car loan.