Set a car budget
Making a budget early in the car-buying process can help you narrow down your options. By understanding your income and expenses, your budget can help set reasonable expectations of what cars you can afford to purchase. Plus, it can be a good indicator of whether a new or used car would be best suited for you and your finances.
A big part of buying a car is understanding the upfront and ongoing costs, such as registration, petrol and car insurance. By factoring these costs into your budget, you can work out how much you actually need to save. If you’re short on time, give our budget planning calculator a go. It’s easy to use and can give you a personalised budget within seconds.
If you’re thinking about buying an electric or hybrid car, then it’s worth looking into what government rebates are available. These rebates can help reduce your car-buying costs, while you do your bit for the environment.
Check your credit score
Your credit score is a number that reflects your borrowing and repayment history. It’s one of the things your lender will look at and consider when assessing how likely you are to repay a car loan and can impact the car finance options available to you. Your credit score will also influence the interest rate your lender will set for your loan. For example, the higher your score is, the lower your interest rate might be.
Quick tips to improve your credit score
- Pay every regular payment you have on time. This includes bills, rent, credit cards and any buy now pay later purchases. There’s a strong chance that anything you need to pay on a regular basis will be on your credit report.
- Be conscious of how much credit you apply for and take on. For example, taking out more than one credit card and using Afterpay for multiple purchases. The fewer loans you have, the better your credit score can be.
- Know what your credit score is. You can get a free credit report from Experian, illion and Equifax. Your report will show how much money you need to repay and any credit you’ve taken out previously.
Choose the right car loan
Car loans come in all shapes and sizes. At the end of the day, it comes down to the car you want to buy and your financial situation. We’re going to explain three different loan options you have for buying a car, so you can discover the one that’s right for you.
Secured car loan
A secured car loan is ‘secured’ against the asset you are borrowing for – in this case, it’s the car. This means that if you’re unable to repay the loan for whatever reason, the lender can sell the asset to cover their costs.
As secured loans represent less of a risk to lenders, they generally come with lower interest rates than unsecured loans.
However, not all cars can be purchased with a secured loan. You’ll need to be buying a new or used car that is up to seven years old.
Unsecured personal loan
An unsecured loan is when you borrow money without having an asset as loan security. As there’s no collateral for this type of loan, unsecured loans are usually used for things like holidays and weddings, but they can be used for cars too.
When taking out these types of loans, your lender will evaluate your financial situation to see if you can commit to the loan, which includes looking at your credit score.
Green Car Loan
A Green Car Loan is a type of secured loan for green cars – hybrid and electric. As these vehicles have lower emissions, you can get a lower interest rate on your loan. Good for the planet, good for your finances.
Want to compare car loan rates? Use our car loan calculator – it’s simple to fill out and you’ll get a comparison in seconds.
Car loan checklist
If you’re ready to apply for a car loan, then here’s a quick checklist to help you get ready for the application process.
Documents to prepare
You need to have:
- Proof of ID, like your driver’s license.
- Financial information, like your expenses and income.
- Employment details, like a payslip.
Eligibility Checklist
You must:
- Be at least 18 years old.
- Be a permanent resident of Australia.
- Earn a regular income.
- Have not been bankrupt or insolvent in the last five years.