How to Buy a Car With a Personal Loan
At some point in your life, you’re going to buy a car. Best that you understand the correct way to go about it, then.
You really, really want that shiny, sexy new car, because you know that it’ll make you more attractive, happier and a better person all round. The problem is, cars are expensive – even more so if you’re lucky enough to live in Australia.
That means you’re going to need a loan; but the question is, which one? Let’s look at some tips to help you save money on the second biggest purchase you’re ever going to make (hint, the other one has more bricks in it).
Australia – home to the world’s most expensive cars
If you lived in America, you’d be driving your dream car already. That’s because in the Land of the (almost) Free, cars are laughably cheap: like $US49,000 for a BMW M3 ($156,900 in Australia), $US91K for a Porsche 911 ($265,000 here) or less than $45K for an Audi TT (almost $80K for us).
You can lease that cute little TT coupe for less than $US130, or, if you’re a Rev Head and you like to shout over the sound of your engine, you could lease some American iron in the shape of a Chevy Camaro, for less than $US100 a week.
Sure, on the downside, you’d be earning less money and have a president that the world really doesn't think that much of, but think of the card you'd have!
In Australia, clearly, cars are hugely expensive and this means you’re going to be looking at a car loan, or some kind of finance. It’s worth keeping in mind that for most people – the type of people who don’t buy boats or helicopters – a car is the second most expensive purchase they’ll ever make, which means you really want to do the numbers, and find the best form of low interest car loan you can.
Car finance lessons
Selling cars to Australians is big business, because we really love buying them – snapping up more than one million new ones every single year, which is a staggering number when you consider the size of our population, the number of people who actually drive, and the cost of a new car.
Arguably an equally large business exists around lending money to people to pay for all those new cars
Now, this may seem obvious, but there are obviously many people who haven’t learned the lesson – “anything that seems too good to be true is too good to be true”. So when you see an offer of “0% financing” on your new car, you need to stop and ponder whether the car company/dealership you’re dealing with is actually living in the real world. Many are reputable and can be trusted, but not all.
As one car-company insider put it, “you don’t get nothing for nothing”. When a car comes with an offer of 0% finance, you have to wonder where the dealer is making their money. Borrowing money at a reasonable interest rate is often way better than 0% finance that includes a host of extra fees. Just be careful when reading contracts.
Going with a personal loan may help you control your budget, or change things, if your financial situation changes.
Get the facts on the best car loan deal possible
What you should always do, of course, is shop around, compare and contrast, just as you would with any purchase, big or small.
So if a dealer tells you they can beat any personal loan deal you might get, demand to know the total repayment figure, using their finance plan. And also get them to break down, line by line, the purchase price you’re going to be paying, including all fees and charges.
We know it’s not fun, and you never do it when you buy an Apple product, or connect to social media, but buying a car is one of those cases where you really need to read the fine print. All of it. Because that 0% finance offer might only apply to the first three years of a loan, for example, and then it may jump to a higher rate for the rest of the loan, which would be a hugely unpleasant surprise.
And, as we say, compare and contrast. It's quick and simple to apply for a Latitude Car Loan, and you can find out exactly how much you're going to pay up front.
Negotiate for a better price on your new car with buying power
Perhaps the biggest benefit of organising your own car loan, before you even head out shopping, is that it puts you in a much stronger negotiating position.
If you head into a car dealer with no idea how you’re going to pay, they’re going to be very keen to sign you up to their finance plans, because that’s an extra earn for them. They can also tie their offer of super-low interest rates to the price of the car, and bamboozle you into thinking you’re getting the deal of a lifetime (note to self, again, these people aren’t your friends, nor are they in the business of giving you things for free).
If, on the other hand, you turn up with a certain amount of money, pre-approved and ready to go, you hold the upper hand. They can only sell you the car, not the finance, and the only way they’re going to make the sale is to offer you the sharpest deal possible.
It helps if you go in with a budget – tell them you’ve got $19,999 to spend, and not one penny more, and when they tell you their best price, walk away, go to another dealer and tell them what you’ve just been offered across town. Pit two dealers against one another, or more than two, and just see how competitive they’ll get about giving you the best price.
With a car loan, you’re in command of how much you’re actaully going to pay in the long run.
And that dream car can be yours, faster and easier than you’d dared to hope.