5 Questions You Need To Ask When Financing a Car

December 5th, 2023

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So, you’ve decided it’s time to purchase a new car and you’re thinking about taking out a loan – congratulations! 

Embarking on the journey of car ownership is an exciting prospect, and car loans are a great way to turn that dream into reality as they enable you to secure a vehicle today, while managing your budget effectively over the long term. 

However, to truly unlock the full spectrum of rewards that the right car loan can offer, it’s important to navigate the complexities of car financing wisely.  

The most important rule to remember is that when it comes to car financing your car, there is no such thing as a bad question.

In fact, the key to making informed car loan decisions lies in asking several simple yet important questions.  

To guide you, we’ve put together a list of the 5 crucial questions you must ask when beginning your car financing journey. By following this guide you’ll be able to drive away confident that you secured the best possible deal. 

1. “What are my fees on my loan?” 

Most people understand the initial value of their loan, but did you know that your finance arrangement may come with other hidden fees and charges?  

Considering these fees aren’t included in the principal or the interest of the initial loan, they can significantly impact the affordability of your finance arrangement. As such, it’s crucial to ask your financial provider if any fees exist and try to minimise them where possible. 

Whether it’s origination fees, service charges, or other miscellaneous costs, a comprehensive understanding of these additional costs empowers you to make informed decisions and prevent unexpected financial burdens. 

2. “What does it cost to get out of my loan early?” 

A car loan may be a fantastic idea today, but unfortunately, it’s impossible to know what the future holds. 

To ensure you are not caught off guard in the case of unforeseen circumstances, it’s a good idea to ask your financial provider how much it may cost you to terminate a loan early or even how paying out the loan early may impact the terms of the agreement. 

This question, although simple offers flexibility and opens many doors to potential exit strategies. 

3. “What Are My Monthly Payments?” 

Determining your monthly payment obligations is the most important step toward accurate financial planning and budgeting when purchasing a car through finance. 

With so much financial jargon surrounding your car loan, it is best to get a transparent understanding of what is expected from you each month. To do this, ask in no uncertain terms “What are my monthly payments?” and more importantly “How will they change in the future?” 

Knowing the exact figure you’ll be allocating each month to repay your loan now and in the future is key to a smoother financial journey allowing you to truly enjoy that new car smell with peace of mind and clarity about what’s expected. 

4. “Is My Interest Rate Fixed or Variable?” 

That’s right. It isn’t only important to decide between a loan and other payment alternatives, but it’s also vital to consider the types of car loans you have available to you. Asking whether your rate is fixed or variable in nature will help you secure stability or flexibility, depending on what you would prefer from your car loan.  

On one hand, a fixed interest rate provides a steady course of action moving forward, offering predictable monthly commitments. 

By contrast, a variable interest rate opens the door to rate adjustments and allows you to respond to market fluctuations.  

In the end, asking this question is about ensuring that your loan resonates with both your temperament and financial objectives. 

5. “What Happens in Case of Late Payments?”  

Of course, everybody intends to repay their loan according to the terms of the agreement, but sometimes, life gets in the way so it’s important to understand the consequences of failing to make a payment. 

While the chances that you will ever need to make a late payment are unlikely, it is still ideal to take a proactive approach so that you aren’t caught off guard and so you can navigate your financial obligations with foresight and clarity. 

Now you know the questions to ask when financing a car! 

These are some of the most important questions to ask during the car financing process to ensure you avoid common mistakes and get the best possible deal.  

However, this is general information only. The right finance option for you must take into account your unique circumstances and your goals for your car purchase – so always check with your trusted financial professional. 

If you find that you still have some questions of your own about car financing, our team at Private Fleet will be happy to answer your concerns and help you find the best deals for your car purchase. 

Simply reach out to us and we can have a chat about your options. 

Find the right (and affordable) vehicle for you with Private Fleet. 

Private Fleet empowers you to gain all the benefits of a fleet purchase but as a private buyer. 

Backed by decades of vehicle industry experience, fleet buying power and a network of car dealers across Australia, we are here to ensure that buying your next vehicle will be as straightforward as possible for you. 

Shopping for a car is an enjoyable process – let us make it hassle-free, too. 

Reach out to us today for a seamless and simple car-buying experience.