1. You will most likely get a lower rate if you buy a new car

Quite simply, new cars are less risk to a financier. They are less likely to breakdown and are more often than not, sold with manufacturer warranties.

2.  If you’re a first time borrower, you are more likely to be approved if you buy a new car

As a first time borrower with no credit history, you’re seen as high risk to the financiers, than someone who has a demonstrated credit history. Therefore, buy a small new car to ensure a lower rate and increase your likeliness of approval.

3. If you are not a home owner, having money in the bank is the next best thing

This demonstrates your ability to live within your means as at the end of each pay cycle, you have money left over.

4. Work out how much you can afford before you go car shopping

If you don’t work out how much you can afford you may end up committing to a car which you cannot afford, use an online calculator such as: www.carloans.com.au to work out the maximum you can spend.

5. Buying a car privately might have a cheaper sticker price, but your car loan interest rate will be higher

When people purchase a car privately, dealerships aren’t there to offer you finance so you’re left with your bank. Most banks will sell you an unsecured personal loan as opposed to a secured car loan. As the loan is unsecured, the interest rate will most likely be higher.

6. Unsecured personal loans may charge a higher interest rate but offer more flexibility

Unsecured loans will allow you to continuously redraw on the loan once you have paid some back as well as make lump sum payments, whereas a secured car loan has fixed repayments for the term. Secured car loans will often occur penalties for paying out early where as an unsecured personal loan will not.

Shaun McGowan is the co-founder of CarLoans.com.au. CarLoans.com.au compares a panel of Australian lenders to find the right loan solution for their customers

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