Few purchases in life require as much research and planning as buying your first-ever car.
However, not everyone has the cash available to purchase a car outright. That’s where a car loan comes in. One of the biggest challenges for first-time vehicle buyers is figuring out how to finance it. Fortunately, there are several options available that can make this process easier.
To help you prepare, we have created a useful guide to vehicle loans.
Read on and let’s help you start your journey to buying your first car.
How does a car loan work?
If you’re unable to pay for a car in full upfront, a car loan can help you secure the necessary funds, with the condition of paying the lender a predetermined amount of additional interest throughout the loan’s life.
A crucial aspect of the loan will be the term you agree to repay it within, which can typically span from 2 to 7 years. It’s worth noting that longer terms may result in lower monthly payments, but you’ll ultimately pay more overall due to additional interest payments made over an extended period.
You can use our car loan calculator to get an idea about how much it would cost to take out a loan over different loan periods.
7 steps to finance your first car purchase
There’s a lot to think about when buying your first car – the colour, the model, the accessories, whether to buy new or used – but one thing many people are unsure of how to properly plan for is how they will finance it, and which type of vehicle finance is best.
Here is a step-by-step guide to getting a car loan that will suit you.
1. Establish a budget
The first thing you need to work out is your car budget. You must take a good look at your overall financial situation and establish just how much you can afford in repayments each month. A realistic budget will help you determine what you can and cannot afford to spend on a new car.
2. Shop around and do your research
Preparing for a car loan application should involve effective research. Before applying for a car loan, there are many things that you should carefully consider such as the price range of the car you wish to buy, the amount you can borrow, how much the repayments could be, the loan term and other important matters such as car insurance and regular maintenance.
3. Have your finance pre-approved
A pre-approval for a car loan is when a lender confirms your eligibility to loan a specific amount of money while giving you the option to back out if you change your mind before you buy.
Generally, a pre-approval will be valid for a number of months and this will ensure you don’t have to rush around trying to secure car finance when you do find the car you a looking for.
4. Save up for the deposit
If you have a sizable car deposit, there’s a higher chance your car loan will be approved. It shows the lender that you’re financially responsible as a borrower. Also, a bigger deposit means lower monthly repayments because the size of your loan is reduced.
5. Consider a co-signer (or guarantor)
If you have a limited credit history, you may need a co-signer to help you get approved for a car loan. A co-signer is someone who agrees to take responsibility for the loan if you can’t make the payments.
6. Look for special car financing offers
Many car manufacturers offer special financing deals for first-time buyers. These deals may include lower interest rates or cashback offers.
7. Secure full loan approval
After gaining pre-approval and making your mind up about the car you want, you’re ready to apply for the real deal.
You should make sure the vehicle you’ve chosen is qualified for the car loan you’re applying for. Some of the things to take note of are the vehicle’s age, mileage and model.
By following these steps, you can make your car financing process less intimidating and more manageable. Remember to take your time and do your research before making a decision.
Ready to buy your first car?
With the right vehicle financing plan and guidance from car-buying experts, you can drive off the lot in your first car with confidence.
If you find that you still have general questions about your car financing options, 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.
Make the most out of your car purchase with Private Fleet.
Private Fleet empowers you to get all the fleet benefits as a private buyer.
Backed by decades of industry experience, fleet buying power and a network of car dealers across Australia, we are here to make sure that buying a new car will be as straightforward as possible for you.
Buying a new car is a memorable experience – let us make it hassle-free, too.
Reach out to us today for a seamless and easy car-buying experience.