Getting a car loan that will set your motor racing - what’s the process?

At Mozo, we’re keen to help you through the unfamiliar parts of finance. If you’re new to the world of car loans, there’s a lot about the process of getting one that can be confusing - and we want to demystify that process.

Despite the rising cost of living and shortages in the new car supply to Australia, sometimes you just need a car. 

To make car loans that bit more transparent, we’ve rounded up some ways to clear up the application process and make sure you get great value - compiled with the advice of Simon Bozzi, director of customer finance at Carma .

Take advantage of a trade in on your current vehicle

Right now, second-hand cars are in the spotlight. This is mostly because the limited supply of new cars put used cars in high demand. If you’re looking to buy a new car, make sure you know what your current car is worth so you can trade it in for maximum value. 

If your existing car is still being paid for on a loan, make sure to read our guide to selling a financed car. You have a few options, but you’ll need to consider paying down your existing debt, or upgrading with a dealer. 

Since prices for second-hand cars are so high right now, and there’s often a wait for new cars, the last thing you want is to miss out on potential money.

Know when an advertised car loan rate is “too good to be true”

If you see a car loan with a super-low rate and get excited, just know that it might not be all that it’s cracked up to be.

Bozzi says, “These are usually a minimum rate or a range, so individual borrowers may be offered a different rate based on their circumstances, or advertised rates may come with restrictive conditions.”

If you have excellent credit, you might be offered a rate at the lower end, but hits to your credit score can result in higher results. These rates may also contain restrictions around the type of car purchased, the age of the car, and more.

Shop around for the best car loan rate

Different lenders will offer different rates and you might be entitled to a better rate - or one that suits you better - if you shop around. 

Don’t feel obliged to take the first offer you see, or to jump on the lowest interest rate. It’s important to read the conditions attached to your loan and to make sure it will work for you over its full term, with features and flexibility that fit your needs.

Get all the details in writing

Surprises are one thing, but no one wants to be surprised when it comes to fees and restrictions on their loan. 

Getting a personal copy of all of your quotes will help you compare and contrast them, lining up different features and tracking rates. This should hopefully make it easier to set apart the standouts.

Figure out your exit strategy

With car loans, you might find yourself wanting to make a switch somewhere down the road. Upsizing your vehicle or scoring a new car will see you needing to exit out of your loan, so it’s extremely important to be familiar with the termination terms and break fees in your contract.

Go into the car loan application process prepared

This might seem like a given, but don’t underestimate the power of preparation. 

To apply for a car loan, you’ll need all of the usual points of identification and proof of income. Every lender will require these same basics, so it’s important to enter the process prepared. It helps to have an idea how your credit history is, preparing yourself for the type of loan you could be offered. It is possible to bring your credit score up, but it can take some time.

The car loans process can seem daunting, but by going in prepared and knowing what to expect, you can get yourself a loan with confidence.

Learn more about the fees and features, tips and tricks of car loans. If you’re in the market for a new car, find our picks for the best car loans.