Compare Car Loans Before You Buy

Buying a car is a two-step process - first you do your research on cars; then you should compare car loan options. Otherwise you might end up with an expensive personal loan.

Most car loans are structured as personal loans, secured against the vehicle, so the first step is to compare loan interest rates with various financial institutions. Remember it is worth looking beyond the big four banks to smaller banks, credit unions and building societies as they may offer deals to attract new customers through competitive car financing. Consider our "Compare Personal Loans" section as a starting point.

Next, you should contact your existing financial provider to ask if they will offer you a ''relationship discount'', which may be better than advertised rates.

However there is also much more to consider than simply the interest rates on the loan. Sometimes lower interest rate is not necessarily a better deal if there is ongoing or upfront fees.

It is also important to check that there are no penalty fees or high exit fees and it's useful to have the flexibility to pay off the loan more quickly than the set term.

If you are very disciplined borrower you can borrow money to buy a car through your home loan. However make sure you pay it off over short-term period (3-5 years). If you choose to pay it off over 25-30 years the costs of the car will double.

A car is a lifestyle asset. It will depreciate in value over time. So from financial standpoint it is the best way to pay for the car outright - either in cash or by using money in an offset account.

Another alternative is to buy 1-2 years old car - it still has newest features, but because of depreciation price is significantly lower.

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Published on February 2-rd, 2011 in Car Loans
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.

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Important Information

Not all providers in the market are included in the comparison.

Any information or advice contained on this website is general in nature and has been prepared without taking into account your objectives, financial situation or needs.