Car loan applications

How exciting! You’re about to apply for a car loan, and you’re about to get yourself a new set of wheels. And it really doesn't matter what car you're going for. New or used, the application process is the same. If this is your first time or you just need to brush up on the process, we’ll touch on it for you to give you a heads up.

How much should I spend?

First thing’s first - work out your budget. Goodness that $70,000 car looks incredible. But can you budget $1300 a month in repayments? We know, we know, the bluetooth capabilities, the leather seats, the safety features, suspension and the run flat tyres are really hard to resist. 

But for $21,000, and $300 per month, you can move the same amount of people around and get your bluetooth. It may not register as well on the safety front, but you will be saving a fortune, more likely actually afford the repayments with motza to spare. Take yourself to dinner! Just don’t drink and drive. 

Budget tip: 

Before you walk into a dealer with an absolute figure in your head, you need to be a little bit more realistic when it comes to your spending habits. Print out last month’s bank statements including all credit cards and line them up. It’s not a matter of saying ‘I don’t have the time’, you really need to make a true observation on how you spend before making a big purchase like buying a car. This is serious stuff! Tally up on a separate piece of paper what you spend on: 

  • utility bills 
  • credit card debt repayments 
  • rent or mortgage payments 
  • beauty and or hair treatments 
  • home/personal/income/car insurance 
  • mobile/home phone and internet connection 
  • petrol
  • groceries 
  • clothes 
  • going out 
  • holiday 
  • budget savings etc 

See? There’s so much to factor in. And when it comes to things like utility bills, also think of the bills you pay quarterly to work out a monthly average. What’s left over? If you’re scrambling to find financial room to breath then it may be time to reconsider your spending habits. 

There’s no point in feeling desperate when it comes to money. You may miss out on some of the luxuries, but wouldn't you want to feel equally amazing in a new car? That’s a luxury in itself. So instead of spending $200 at the hair salon for your tint and trim, try opting for the $15 packet job at home. You may not like doing it yourself at first, but you’ll eventually love the savings and also getting behind the wheel of your new car even more. 

Compare Car loans 

Now that you’ve worked out how much you can spend on car repayments, it’s time to compare loans. Not the easiest task as you probably already know, which is why our team of experts have built a Mozo car loan comparison calculator to help you along. Just to give you an idea of what to expect to pay on a $30,000 car, check out some of the scenarios below, while using your new car as security on the loan:

Secured loan: Fixed rate
Car loan value: $30,000
Term: 3 years

Lender Rate % Monthly repayments- 3 years
People's Choice 5.64% $908




Secured loan: Fixed rate
Car loan value: $30,000
Term: 5 years

Lender Rate % Monthly repayments- 5 years
People's Choice 5.64% $575




As you can see, by stretching your loan term by an extra two years, aren't your repayments are a lot less? It makes the amount you pay more manageable and allows for other spending you need to make in the meantime. No point in putting the pressure on! Ease it up a bit, even though you pay a little bit more in interest, you know at least with a fixed rate you you know exactly how much you’ll be paying each month with no hidden increases like with a variable rate.

How to choose a car loan

So by this stage, you’ve worked out your budget, used Mozo’s car loan comparison tool to weigh up the different products and lenders and now you're at the point of having to bite the bullet and choose one. One product. One lender. You can do this!

Now you need to have a little faith in your research and choose the one that fits in with your life. We’ve discussed everything from budget to lender to type of loan, and the smaller features. But still equally as important is if you get charged an application fee. If so, how does it compare to competitors fees while comparing their interest rate? Are you better off paying a higher one-off fee for a longer term lower interest rate? Can I make extra repayments or pay off my car loan without being penalised? Food for thought. 

What documents do I need to have ready? 

Well you don’t want to finally decide on a lender and product, then psych yourself up to walking in and making your enquiry onto then swiftly walk back out because you’ve underprepared. Having all the right documents before walking into an appointment means that you can complete your application a lot faster, even know whether or not you’ve been approved within that day. Sounds great, right? Great. For a smoother process, make sure you have: 

  • Bank statements (up to 3 months) 
  • Tax returns (up to 2 years) 
  • Invoices that you’ve sent out if you’re a contractor (up to 3 months) 
  • Statement from your accountant or employer stating your income 
  • Drivers license 
  • Passport 
  • Medicare card 
  • Amount of credit available to you (re: credit card credit, whether used or not) 

Typical monthly expenses including rent and mortgage repayments. As each lender has different requirements, always check of course what your lender needs. They may need less or more than what we've listed above. Then apply and away you go! 

Top 5 tips on getting your car loan application approved 

If you’re generally on time with paying your bills, your credit rating should be ship shape and you’ll be a pretty good candidate for making a successful car loan application. But what can you do to help your application get across the line? Here’s a couple of things we thought we’d let you in on: 

  1. 1. Residency: this is no secret. You absolutely must be an Australian resident. 
  2. 2. Income: you need to be realistic about how much you earn compared to how much you want to borrow. 
  3. 3. Bad credit history: then you’ve got about 6 months to rectify it. Make sure you pay all your bills on time, even 3-5 business days in advance before the due date so that you never miss a payment or get charged a late fee. Set up a direct deposit so that you never forget. 
  4. 4. Empty credit cards: well that’s good news! But if you’re not using them, you’re better off closing them as lenders see that potential credit used and thus a debt risk. The reason is that if you start using it, your potential lender may decide that if you’re overwhelmed in debt you’re at risk of not being able to repay the debt you owe them. 5. Security for your loan: not only will your interest rate be lower, but so will your repayments. placing collateral as security on your loan will also give the lender confidence that you’re serious about paying off your car loan. Mozo advisees using the car you’re purchasing on your loan rather than your house. It’ll be a pretty awful scenario to be forced to sell your house just to repay your car loan, right?