Finding the car first and thinking about finance afterwards might seem like the natural order of things.
But there can be advantages in doing it the other way around.
Understanding your potential finance position before you commit to a vehicle can give you a clearer idea of what you may be able to borrow, what repayments could look like and which loan structures may suit your circumstances.
For car buyers in Thornton and surrounding areas of Maitland and the Hunter, that can make the buying process much easier to navigate.
Start With the Budget, Not Just the Car
There are two numbers worth thinking about when buying a vehicle.
The first is the purchase price.
The second is what the finance will actually cost and whether the repayments comfortably fit your budget.
A $40,000 vehicle, for example, doesn’t automatically mean every $40,000 car loan will produce the same outcome.
The loan term, interest rate, fees, deposit, balloon payment and lender can all affect the repayments and overall cost.
This is why comparing finance structures can be just as important as comparing vehicles.
What Can Affect a Car Finance Application?
Car finance isn’t assessed on the vehicle price alone.
Depending on the type of application and lender, factors considered may include:
your income
existing financial commitments
living expenses
credit history
employment situation
the amount you want to borrow
whether you have a deposit or trade-in
the age and type of vehicle
whether the vehicle is being purchased privately or through a dealer
the proposed loan term
the overall affordability of the loan
Different lenders can also have different lending policies.
That means an application that fits one lender’s criteria may be viewed differently by another.
Should You Arrange Car Finance Before Visiting a Dealer?
You don’t necessarily need to have a completed loan before looking at cars.
However, understanding your finance options before committing to a purchase can put you in a more informed position.
You may have a better idea of your budget and potential repayments before negotiating the vehicle price.
It can also allow you to separate two decisions that are often bundled together at a dealership:
Which vehicle do I want to buy?
and
How do I want to finance it?
Dealer finance can be convenient, but convenience shouldn’t be the only consideration.
Interest rates, fees, loan terms, balloon payments and the total amount repayable can all matter.
What Is a Balloon Payment?
Some car loans can be structured with a balloon or residual payment.
Instead of repaying the entire financed amount through your regular repayments, part of the balance is left until the end of the loan.
For example, a five-year car loan could have a balloon amount payable at the end of the five years.
A balloon can reduce the regular repayment compared with financing the same amount over the same term without a balloon.
However, the remaining balloon still needs to be dealt with at the end of the loan.
Depending on your circumstances at that time, that could mean paying it from your own funds, selling or trading the vehicle, or considering refinancing if available and appropriate.
A lower regular repayment therefore doesn’t necessarily mean a lower overall finance cost.
The whole structure should be considered.
Secured or Unsecured Car Finance
Car finance can also be secured or unsecured.
With secured car finance, the vehicle is generally used as security for the loan.
An unsecured loan does not use the vehicle as security in the same way.
The structure can affect lender options, rates and eligibility, so it is important to compare more than the advertised interest rate.
Buying a Used Car in Thornton
Finance isn’t limited to brand-new vehicles.
Used cars can also be financed, subject to lender requirements.
The age of the vehicle can become important because lenders may have policies around how old a vehicle can be when the loan starts or finishes.
This becomes particularly relevant when buying an older vehicle.
Before agreeing to purchase, it can therefore be worth checking whether the proposed vehicle is acceptable under the lender’s criteria.
What About Buying a Car Privately?
A private-sale vehicle may also be financeable.
However, financing a private sale can involve additional requirements compared with buying through a licensed dealership.
The vehicle and seller may need to be verified and appropriate checks completed before funds are released.
Buyers should also consider conducting a Personal Property Securities Register search to identify whether a security interest is recorded against the vehicle.
Private buyers don’t receive all of the same protections that may apply when purchasing through a licensed motor dealer, so completing appropriate checks becomes particularly important.
What If You Already Have a Car Loan?
Buying another vehicle doesn’t always mean starting from scratch.
If you still owe money on your existing vehicle, the current payout figure needs to be considered alongside the vehicle’s sale or trade-in value.
Sometimes the vehicle is worth more than the outstanding loan.
Sometimes it is worth less.
If the payout is higher than the vehicle’s value, there is a shortfall to deal with.
That doesn’t automatically determine whether another finance application is possible, but it is something that should be identified before committing to the next vehicle.
Does Applying With Several Lenders Help?
Submitting applications everywhere isn’t necessarily the best way to compare car finance.
Credit applications can appear on your credit report.
Instead, a broker can look at the circumstances of the proposed transaction and consider which available lender options and policies may be appropriate before an application is submitted.
This is one of the areas where lender knowledge matters.
The question isn’t simply:
Who offers car loans?
It is:
Which available lender and loan structure may suit this particular borrower, vehicle and transaction?
What Documents Might Be Required?
Requirements vary depending on the applicant and lender.
You may be asked for information such as:
identification
employment details
income information
bank statements
details of existing liabilities
information about the vehicle
purchase invoice or contract
details of a trade-in
information about your financial position
Self-employed applicants may have different documentation requirements depending on the lender and type of finance being considered.
Providing accurate information from the beginning can help the application be assessed efficiently.
Looking Beyond the Interest Rate
The advertised rate is important, but it isn’t the only number worth considering.
Look at the broader structure, including:
establishment or application fees
ongoing fees
broker or introducer fees where applicable
loan term
repayment frequency
balloon payment
early repayment conditions
total amount repayable
For regulated consumer car loans, the comparison rate can also assist when comparing the cost of loans of the same amount and term because it incorporates the interest rate and certain fees.
Car Finance for Thornton and the Hunter
Thrive Broking assists customers with car finance in Thornton and across Maitland, Newcastle and surrounding Hunter communities.
We can help with finance for a range of vehicle purchases, including new and used cars and eligible private-sale purchases.
The right starting point isn’t necessarily choosing a lender or completing an application.
It is understanding the purchase, your circumstances and the finance structure you are considering.
Thinking About Buying Your Next Car?
If you’re planning to buy a vehicle, you don’t have to wait until you’re sitting at the dealership to start thinking about finance.
Thrive Broking can discuss the proposed purchase, explain potential finance structures and investigate available lender options based on your circumstances.
All finance is subject to lender eligibility, assessment, approval and applicable terms and conditions.