How does car loan finance work?

There's nothing quite like the feeling of owning your own car.

But with all the buzz of the test-driving and negotiating process, it can be easy to leave one detail to the last minute. And that’s car finance.

So how does it actually work?

It all comes down to one question: what you can afford to pay? If you don't have enough funds saved for your car of choice up front, getting a car loan might be a good option.

Good news is, a car loan can be used to buy a brand-new car, or a second-hand car from a dealer, or via a private seller.

Here’s how it works.

First step: set your budget

If you've decided on a car loan, you'll need to have an idea of how much you can afford to borrow and repay.

Use our Budget Planner to see how much you can afford, and our Car Loan Calculator to see how much the ongoing repayments would be. You can choose from weekly, fortnightly or monthly repayments depending on your lifestyle and pay cycles.

Next step: choose your loan

If you're buying a car from a dealership, you may be offered finance directly with the dealer, but be careful as there might be extra fees or commissions.

If you're getting a loan with Latitude, here are a couple of terms you'll need to know:

• Secured car loan: This kind of loan has a lower interest rate because the car you're buying is used as security. Latitude can easily check if the car's condition and age is suitable to be used as security before you pay your deposit.
• Fixed interest rates: With a fixed rate loan, you'll always know where you stand. These mean you won’t have to worry about fluctuating interest charges.
• Repayment: You can choose to repay your loan in weekly, fortnightly or monthly instalments. Extra repayments can be made at any time, though if you pay your whole loan off early then an early termination fee could apply.
• Late payment fee: These are what you want to avoid. It’s often a good idea to set up repayments via direct debit, so you don’t need to remember to make the payment every time.
• Balloon payment: This is a way to reduce your regular repayments, by committing to a one-off lump some payment at the end of your loan term.

Next step: get approval

At this stage, you can get a loan approved – even if you don’t know exactly which car you want yet.

With Latitude, you can easily apply for a loan online or via phone. You’ll need a few documents ready, like your payslips and ID paperwork.

After you’ve returned your docs, we’ll get in touch within one business day to let you know how your application is tracking, so you won’t be left wondering for long.

Next step: start shopping

Got the thumbs up on car finance? Now comes the fun part: test drives.

Love a car? Don't show all your cards, and never let a seller know what your exact budget is. Remember, you can negotiate with dealerships to get the best price.

It also pays to do your homework and compare cars at both physical dealerships and online, so you can be sure you’re getting the perfect price along with your perfect car.

Ready to get started? Take a look at Latitude Car Loans.