A car is a pretty big purchase, and prices are going up year after year. If you don’t have the savings to buy a car outright, don’t worry: you might be able to take out a car loan to finance your new (or used) set of wheels.
Before you head off to your local dealership, consider using a car broker to walk you through the process.
They can help you to lock in the lowest car loan interest rate so you can drive off the lot knowing you got the best car finance deal.
Do I need a car loan?
The answer is yes, if you can’t afford to pay the full price of a car on your own. A car loan is a personal loan taken out to purchase a new or used car (or a similar vehicle), and it’s the best way to finance a car.
There are two main types of car loans: secured and unsecured. With a secured car loan, your car is essentially collateral, and it can be repossessed by the lender if you fail to make your repayments on time. Since they offer more security to the lender, they tend to have lower interest rates. Unsecured loans don’t require any collateral, so they pose a higher risk to lenders — and usually have higher interest rates to match.
To qualify for the best car loan rates, you’ll need to prove you have a steady income, a low debt-to-income ratio and good credit.
How do car loans work?
Just like a mortgage, a car loan is a contract with a set payment term. You’ll need to pay back the money you borrowed within a certain period or “term.” Along with repaying the loan amount, you’ll be charged interest on the balance at a fixed or variable rate, plus various fees and charges.
Those costs can add up, which is why it’s important to do a car loan comparison to lock in a loan with the lowest possible rate. The average car loan term is 5 years, but you can opt for a shorter or longer term. Depending on your lender, you could choose a term lasting as little as 12 months all the way up to 7 years.
Are car brokers worth it?
Finding the right car loan for your needs and budget can be tricky, which is why we recommend working with a car loan broker for a hassle-free experience.
You’re probably wondering: what does a car broker do? Here are a few ways they can help you:
They help you navigate the most competitive options
There are dozens of lenders in Australia, and they each have their pros and cons. For example, brick-and-mortar banks typically have stricter eligibility requirements and lower interest rates, while online lenders tend to charge higher rates, but they’re more open to accepting people with less-than-perfect credit.
A broker who’s familiar with the landscape can narrow down the best choices for you based on your needs and financial situation. Savvy partners with the top 25 lenders in Australia, which not only cuts out the clutter but helps you find the most competitive loan with flexible repayments.
They help you choose between variable and fixed-rate car loans
The interest rates for any type of loan depend on market conditions, and they can fluctuate based on the Reserve Bank of Australia’s official cash rate. So, how does financing a car work?
If you get a fixed-rate car loan, you’ll keep the same interest rate and repayments for the life of our term, so you know exactly how much you’ll need to pay each month — which is why they’re the more popular choice. On the other hand, variable rate loans can go up or down based on the market, and in turn affect your repayments.
They help you lock in a great rate
A car loan is a commitment, and you’ll need to make your payments on time every month to avoid a penalty. There are three major factors that impact your repayments: your loan amount, term and interest rate.
Car brokers like Savvy can help you to get accurate quotes and compare interest rates, fees and charges between lenders so you can save hundreds or even thousands of dollars on your car loan. The more you shop around, the more you can potentially save!
They act as an intermediary
Think of auto brokers as the middleman. They have relationships with an extensive range of dealerships across the country, and they can negotiate prices with them on your behalf, passing potential discounts on fleet pricing onto you.
They’ll help you secure financing
Your broker is there for the entire process from start to finish. Along with working with you to choose a lender and drive rates down, they’ll help you to gather everything you need to get your application approved. Once that’s done, they’ll also organise pre-purchase checks.
They’ll save you money in the long run
Car brokers work for you, not the dealer, so they usually charge a flat fee for their services. But the savings they can find for you far outweigh this fee, which is why using a broker can actually cut the overall cost of purchasing a new or used car.
What are the added bonuses of using a car broker?
Working with a top car broker like Savvy has a few additional perks. Thanks to their industry knowledge, they know the true value of a car — so you can be confident they’ll negotiate the best price for you.
They also offer personalised service. Once you’ve told them what you’re looking for in a car and outlined your budget, they’ll do the legwork for you.
If you have poor credit, they can leverage their connections to help you get approved for financing at the most competitive rates. And if you need 100% financing, Savvy can finance your insurance for you.
When you’re in the market for a new or used car, having a car broker by your side can make the process easier and cheaper overall. Their goal is to help you find the best car, at the best price, from the best lender.