How to upgrade your car with a small car loan

Considering upgrading your daily drive? These days, most of us spend a lot of time (sometimes way too much time) in the car, so it’s important to make sure you feel comfortable and safe.

Enter the small car loan. Borrowing a small amount – say $5000 – will make it possible to find something that actually feels like an improvement on your current car, and truly suits your needs, whatever life stage you’re at and whatever headspace you’re in.

Here are a few things to consider when hunting for your perfect upgrade.

Do you have new circumstances to factor in?

Maybe you just landed a brand-new job, and your commute has tripled in length. Then it makes sense to upgrade. Usually, a new car will be more fuel efficient than your current ride, so factor your reduced petrol costs into your budget. Or if you’re keen to give a hybrid or electric vehicle a try, this could be a good reason.

Or maybe you’re expecting a baby (congrats, by the way!). In that case, safety will probably be a major consideration, and the newer the car, the better the safety features. Or perhaps you need something bigger to squeeze in a car seat and pram (and nappy bag, and toys, and snacks, and the kitchen sink.)

Either way, make a list of what you need now and in the foreseeable future. The clearer you are about your needs, the more targeted you can be with your search.

Is your current car getting super unreliable?

If you're spending more and more time in your local mechanic's waiting room, the writing could be on the wall (figuratively, of course).

Your challenge is to decide whether the cost of ongoing repairs is going to offset the price of a new car. So get out the pen and paper, and tally up what you’re spending on repairs, versus the extra you’re going to shell out for a new car or car loan. Factor in the inconvenience and uncertainty as a separate consideration.

Then start thinking laterally. Is there another way you can keep your car, but reduce the cost of repairs? Learning some basic mechanical maintenance might be an option – with the added benefit that you’ll save money into the future.

Do you just… really want a new car?

There's no denying it, sometimes you’re just sick of your car.

You may have owned it for years, and it just doesn’t reflect who you are anymore. Maybe it’s got too many bad memories attached. Maybe it’s a hassle to park and you really want something more zippy, or stylish, or powerful – or all three.

These are all valid reasons to look for an upgrade. Chances are, your new car will be safer and more fuel efficient, so it’s easy to justify the change. And let’s face it: not much can beat that new car smell.

Can you wait to upgrade?

Once you’ve decided to upgrade your car, it’s time to craft a plan of attack.

Ideally, you want to sell your current car when you can get the most value for it – the balance of which you can use to offset the cost of a new ride. And given most cars depreciate in value rapidly – often losing more than half their value within three years on the road – it’s important to time this move properly.

As a general rule of thumb, it makes the most sense to upgrade your car after three years when depreciation has slowed, but before the warranty expires. Also, a word to the wise, if you've splashed out on an extended manufacturer warranty, read the fine print because they're not always transferable from person to person.

But if you’re still paying off car finance, take into account that by adding your old motor loan to a new motor loan, you may end up owing more than the new car is worth. So if you can pay off your current car before you trade it in, it could be worth those few more months of effort.

How to get started

Once you’ve identified your new dream car, consider if you’ll need a loan to bridge the gap between the trade in price and what you’ll owe. Remember to factor in extras, like insurance, rego and other on-road costs – as with everything car-related, costs can quickly add up.

Need a little more cash? Get started with these options from Latitude – available for amounts starting from $5000.