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The First-Time Buyer's Guide to Car Loans

THE FIRST-TIME BUYER'S GUIDE TO CAR LOANS There are few purchases in life that require as much research and planning as buying a car. It can be daunting, but understanding the full process of getting a car loan before you buy can make all the other decisions much easier. THE COSTS OF BUYINGA CAR Being aware of the full cost of buying a car avoids unforeseen costs and gives you more leverage when negotiating. The full cost of your car can include the following: INITIAL COSTS RECURRING COSTS REGISTRATION GST STAMP DUTY TAX STAMP DUTY INSURANCE SERVICING FUEL DEPOSIT DEALERSHIP FEES REPAYMENTS RENEWAL CAR PURCHASE VS. CAR LOAN PROS • It's the simplest way to buy: you find a car, you pay the dealer, and the car is • It allows you to select a car that you want – complete with all the features you need for yourself and your family. yours. • No hassle of applications, credit cards, and bank loans. • You pay off in instalments, which helps you manage cash flow. • Loan repayments may be tax-effective for you. CONS • It limits the kind of car you can • Interest applies. purchase. • It creates a big impact on your cash flow and cash reserves. KEY ELEMENTS OF A CAR LOAN With a car loan, the lender loans you the money to purchase the vehicle, and you pay back the money - plus interest, in instalments over an agreed period of time. 1 LOAN COST 2 INTEREST RATE 3 DEPOSIT Consists of the The rate that is The cash that is paid by the borrower at the time of purchase. Not always a requirement but it can help reduce the overall cost. charged to the principal, the cost of the vehicle; and the interest, the charge by the financier. borrower over the life of the loan. It is expressed as an annual percentage. CAR LOAN APPLICATION $30,000 4 BALLOON PAYMENT TERMS & CONDITIONS All the other items that make up An optional lump sum payment at the end of your loan, which helps lower your monthly repayments. A typical balloon: 30% of your principal. the car loan. This can include the loan term, insurance and registration requirements, early exit fees, resale terms, etc. TYPES OF CAR LOANS There are various types of car loans that are available, each of which has their own benefits. It's often best to shop around to find a car loan that suits your needs and lifestyle. STANDARD CAR LOAN The simplest of loans where the lender provides the borrower with finances to purchase a car. CHATTEL MORTGAGE CATER :: SERVIC A car loan for business use, which attracts lower interest rates. FINANCE LEASE A lease where the financier purchases the car and leases it to the motorist. At the end of the lease period, the motorist can decide whether to refinance the car, return it, or purchase it for the residual amount. NOVATED LEASE A 3-way arrangement where an employer pays the financier for an employee's car lease expenses from their pre-tax income. OTHER FACTORS TO CONSIDER - NEW vs. USED 2- PERSONAL vs. BUSINESS • Deciding on whether or not the vehicle is to be used for personal or business use can affect your purchasing decision. Used cars can be beneficial in reducing depreciation and drawing lower purchase prices. However, there's always the risk of buying one that is out of warranty. • Car loans for business use, for instance, involve lower interest rates • New cars are easier to purchase, as its condition isn't a key factor and there's plenty of financing options available (at lower interest rates). and less documentation than a standard car loan. Whilst there is a lot to consider when applying for a car loan, the whole car buying process shouldn't be a scary one. Buying a car should be an exciting experience - and with the proper research and due diligence, it sure can be! For more guidance, please feel free to give the AutoCarLoans team a call on 1300 301 051 or reach out at any time at info@autocarloans.com.au. DISCLAIMER: The thoughts and opinions conveyed on this website are those of the authors only and are of a general nature. This does not constitute financial or general advice to you from Auto auto CarLoans Loans Group. You should seek your own independent advice from a professional which is specific to your circumstances before considering any of the items referred to in this article, including finance, insurance, and car buying. .com.au

The First-Time Buyer's Guide to Car Loans

shared by theadventurer on Dec 04
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Buying a car is one of the major purchases most people make. It is an exciting moment, but it can be challenging if you miscalculate what you can afford to spend on monthly car loan payments and car m...

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