Car loan tips and tricks

Whether you’re about to apply for a car loan or still just thinking about it, you’ve come to the right place! Before choosing a lender, we suggest reading up on some of Mozo’s car loan tips and tricks. 

At the end of the day, being clued up on what to look for in a car loan could save you thousands of dollars over the life of the loan. 

So, without further ado – Here are Mozo’s 6 tips and tricks for finding the right car loan:

Dealer finance may seem like a good idea at the time, especially being a one-stop shop for all your car needs. But when you do the sums and comparisons, lenders outside of the car dealership are quite often the savvier option.

The truth is, it can be tempting to give in to dealer finance options that offer a low interest rate. But there's often a catch. With dealer finance, there’s generally little room for negotiation on the actual vehicle, so you need to consider your options very carefully.

Having your car loan sorted before you walk into a car dealership can increase your negotiating power. The salesperson will see you as a serious contender if you’re not depending on dealer finance to convert the enquiry to a sale. 

The same goes when looking for a second-hand car – it’s generally better to arrange a used car loan prior to making an offer on the vehicle.

It can be very appealing when a dealership offers you free service for 5 years or up to 80,000km, especially if you’ve got a fancy-ish car that requires dealership service to keep the warranty viable, which could cost anywhere from $450 to $900 per service. You could be saving up to $5,000 in the first five years of your car's life, right?

Not exactly. With these kinds of ‘special offers’, just as in the dealer finance scenario mentioned above, you may not actually shave all that much off the price of the car. Wouldn’t you rather negotiate $5,000 off the sale price and take your car to get serviced at an independent mechanic for $200?

And don't fall into the ‘for a limited time only’ trap. Heard that one before? You should really take your time when making your decision about buying such an expensive item. So, maybe rethink the special offer so you can stay level-headed and negotiate the car you want at a price you can afford. It's better to make a balanced decision than a rushed one!

Yes, some people prefer the excitement that variable rates can offer. In an ideal world where the rates stay low and only get lower, we'd all want to jump on board!

But what if the RBA cash rate falls and your lender doesn’t pass on the benefits? It’d feel like you’re being ripped off, right? What if the cash rate goes up, and your lender suddenly decides to up your rate and then ups it again? There's nothing worse.

Fixed-rate car loans:

That's why many people tend to steer towards a fixed rate. Not only will you (hopefully) secure a reasonable rate, but you will have the same predictable repayment every month. Fixed rates tend to be a little higher at the outset, but sometimes, that security is well worth it.

It also means you can budget for your other monthly expenses around your car repayment. If you always know what your expenses are, you technically shouldn’t ever be out of pocket unless your income decreases or your other expenses increase (hello, cost of living!). Even more reason to avoid the gamble of a variable rate and opt for a safer, more predictable one.

When you find yourself with extra money, it can feel all too exciting. That cash bonus you received at work, in the lotto, as a gift, or from your tax return? It should probably go towards your debt.

Whether it's on your credit card, mortgage, or car loan repayment, try to put as much as you can towards what you owe the bank. Why? Because you can pay off your debt quicker, which also means you'll pay less interest in the long run.

If you want the freedom and flexibility to repay more when you can, then you’ll need to find a car loan that offers free extra repayments. It might mean a higher interest rate, but it might be worth it if you’re looking to make extra repayments on your loan. It’s all about what works best for you.

After a loan that’ll cover the cost of a new car, plus give you some extra money to put towards a home renovation, holiday or other expense? It sounds like what you might be after a personal loan. 

What’s the difference between a personal loan and a car loan? A car loan is specifically used for the purchase of a car, whereas with most personal loans, you don’t necessarily need to specify what you intend to use it for.

What’s the catch with using a personal loan to pay for a car rather than a car loan? Well, you’ll likely pay more in interest with a personal loan than if you were to secure a car loan. However, in some cases, you can use the value of the car as security.

Car loans can come with a range of different fees, like application fees, monthly service fees, early repayment penalty fees, and late payment fees. You’ll want to keep your eyes peeled for these when reading through the terms and conditions because getting stuck with an unexpected fee is a real pain. 

Ideally, you want to find a loan that suits your needs and has limited fees. It's also important to calculate whether the amount of fees you pay is offset by a low-interest rate or vice versa. 

Need a little nudge or help exploring your car loan options? We’re here to help! Visit Mozo’s car loan comparison tool to start comparing options today. We've also pulled aside some of Mozo's best car loans.